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Service Contracts

When you buy a new computer or appliance, the salesperson may try to talk you into buying a service contract or an extended warranty.  The costs of service contracts can range from $50 to $500, depending on the length of the contract and what it covers. Sometimes, the extra protection is unnecessary or doesn’t offer enough coverage to justify the cost.

Before you buy a service contract, consider the following:

  • Service contracts, like warranties, provide repair and/or maintenance for a certain period of time. However, warranties are included in the price of the product, while service contracts are sold separately for an extra charge.
  • The service contract may cover something that’s already included in the warranty, or it may only cover certain parts of the product or certain kinds of repairs. For example, many computer service contracts specify that “external” parts of the computer, such as the housing and external controls, aren’t covered. Most service contracts exclude repairs needed because of misuse or failure to properly maintain the product.
  • Some appliances generally don’t need many repairs, and the extra cost of a service contract may not be worth it.
  • Some service contracts have a deductible, or charge you a fee for each repair call. If the contract is offered by a local company, you may not be able to get service if you move out of the local area.
  • If the service company goes out of business or files for bankruptcy, there may be little you can do to get a refund or to get service for your product.

When deciding whether or not to purchase a service contract, consider these tips:

  • Read the manufacturer’s warranty and the service contract carefully. If they cover many of the same items for the same period of time, you probably don’t need the service contract.  Service contracts will typically run concurrently with the manufacturer’s warranty.
  • If the service contract doesn’t say that an item is covered, assume that it is not.
  • Most service contracts cover only repairs, not replacement of an item.
  • Watch out for high-pressure sales tactics by salespeople who push service contracts. Ask how much commission they make off the sale of service contracts.
  • Check out repair statistics on the item you are buying. Consumer magazines or websites can be good sources of information about how reliable certain brands may be and how often certain items need repairs.

We Can Help

If you have a complaint about a service contract, contact us for help or call toll free within North Carolina at 1-877-5-NO-SCAM.