Consider service contracts thoroughly

To many consumers, buying a service contract is like buying “peace of mind” from repair hassles.

According to the Federal Trade Commission, an estimated 50 percent of all new automobile buyers, and many major appliance buyers purchase service contracts. Before you purchase a contract, consider the following:

-What does the contract offer?

A service contract, like a warranty, provides repair and/or maintenance for a specific period. Service contracts or extended warranties cost extra.

-What does the contract cover?

A service contract may cover only certain parts of the product or specific repairs. Read the contract carefully and if it does not list something as specifically covered, assume it is not covered. Also, find out if the repairs are extra on weekends, nights or holidays.

-What will the contract give you that the warranty will not?

Make sure you know what the warranty coverage is. Compare the warranty against the coverage of the service contract and decide if it is worth the extra expense. Consider whether the item is likely to need repairs. You may not benefit from a service contract if the item is unlikely to need servicing, or if the potential for cost repair is low. Ask if there is a limit to the number of repairs or trip during a calendar year.

-Who is responsible for the contract?

Consumers often find themselves with a contract company that is no longer in business and cannot repay claims. The best way to avoid this situation is to consider whether the company is reputable. Ask the local Better Business Bureau if they have any complaints.

Although the Federal Trade Commission cannot represent consumers directly if you are in dispute with a company, it wants to know if companies are not meeting their obligations.

The FTC works for the consumer to prevent unfair business practices and to provide information. To get free information, call toll-free, 1-877-FTC-HELP (1-877-382-4357) or use the complaint from at

Whether or not to purchase these add-ons is up to you, the consumer. Carefully consider all alternatives before making a decision.

Ruth Brock is an extension agent with Alabama Cooperative Extension Services. She can be reached by e-mail at