Service Contracts: Should You Buy One?

photo of edsel warranty contract

Sellers of cars, major appliances and other expensive items may try to sell you a service contract or extended warranty. Service contracts can add hundreds to your purchase price and are rarely worth the cost. Some duplicate warranty coverage you get automatically from a manufacturer or dealer. Ask these questions before you agree to one of these contracts:

  • Does the dealer, the manufacturer, or an independent company back the service contract?
  • How are claims handled? Ask who will do the work and where it will be done.
  • What happens to your coverage if the dealer or administrator goes out of business?
  • Do you need prior authorization for repair work?
  • Are there any situations when coverage can be denied? You may not have protection from common wear and tear. And some manufacturers do not honor contracts if you fail to follow their recommendations for routine maintenance.
Source: General Services Administration
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