State of Minnesota
More about
Attorney General
Lori Swanson

Minnesota Attorney General's Office

1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101

(651) 296-3353
(800) 657-3787

M - F 8 am - 5 pm

TTY:(651) 297-7206
TTY:(800) 366-4812

Motor Vehicle Service Contracts

Before you buy, Minnesota Attorney General Lori Swanson offers these tips:

What is a Motor Vehicle Service Contract?

A motor vehicle service contract is an agreement between a consumer and a service provider that covers unexpected or costly repairs after the original warranty has expired. They are sometimes called “extended warranties.”

Beware Of “Extended Warranty” Scams

Beware of mail or phone calls from someone telling you that your car warranty is expired. It probably isn’t—you might not even have a warranty. Scam artists often use high pressure sales tactics to try and peddle so-called “extended warranties” to unsuspecting consumers. These products are usually a poor investment. The calls are sometimes made to get people to give out their financial information which can then be used to commit fraud or identity theft. Do not allow someone to rush you into buying a junk service contract you do not need or want. Before you buy anything, check on the reputation of the company and read the contract. Report unwanted calls about service contracts to the Federal Trade Commission at:

Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue NW
Washington, D.C. 20580
Toll free: 1-877-382-4357 External Link

Before You Buy

Before you buy a service contract, make sure that you fully understand who is providing the service and the terms of the contract. Consider the following tips:

  1. Research the reputation of the companies on the contract. Under Minnesota law, the contract must identify both the contract provider and the contract administrator. These are often two separate companies—you buy your motor vehicle service contract from the provider but the administrator actually evaluates and pays for your claims. Once you have identified the provider and the administrator, check both companies with the Better Business Bureau and the Minnesota Department of Commerce. If the contract does not identify a provider and an administrator, do not buy the contract.
  2. In general, be wary of signing a contract with a provider that does not have proper insurance. Under Minnesota law, companies that sell service contracts are not required to have insurance to back up their obligations. The contract must disclose if the provider is insured and provide the name and address of any insurance company. If the provider is not insured, you buy at your own risk. The Minnesota Attorney General’s Office has received complaints from consumers who were not able to get their claims paid—or get any of their down payment back—because the provider they bought the service contract from was uninsured and had gone under.
  3. Read the contract carefully before you purchase. Reputable companies allow you to read the contract—not just the sales brochure—before you sign anything or put down a deposit. Read the fine print. Many contracts contain terms and conditions that are unfavorable to consumers. When you review the contract, be on the lookout for the following:

Exclusions. Service contracts don’t cover all repairs. “Exclusions” are things that the contract will not cover and are usually listed near the end of the contract. Pay close attention—providers often use exclusions to get out of paying for certain repairs. Watch out for broad exclusions that allow providers to deny coverage. Many contracts, for example, will not pay for damage caused by “normal wear and tear.” Such broad language allows providers to deny coverage for virtually any reason—a provider can easily claim that any problem is the result of “wear and tear” and refuse to pay your claim. Make sure your contract contains no broad exclusions before you buy it.

Maintenance Requirements. Under the contract, you may have to follow the manufacturer’s recommendations for routine maintenance, like oil and spark plug changes. If you do not maintain your car as recommended, a provider may deny your claim—even if your claim has nothing to do with oil, spark plugs, or whatever the maintenance requirement may be. To prove you have maintained the car properly, keep detailed records, including receipts. Take the cost and burden of the maintenance requirements into consideration before you buy the contract.

Deductibles. Determine if the contract has any deductibles. A deductible is a set amount that you must pay out-of-pocket before the provider will pay for any expenses. Be sure you know how deductibles apply. Does the contract have a deductible for each repair or for each component repaired? Pay close attention to the language—some contracts contain so many deductibles that they outweigh the value of the contract. Add the cost of deductibles on top of the total price of the contract before you buy it. Is it still worth it?

Authorization. Find out if you need prior authorization from the contract provider in order to have repair work done on your vehicle. Some consumers have been unable to get money back for repairs because they did not get prior authorization from their providers before having repairs performed.

Purchase Price and Sales Terms. A contract must list the purchase price and sales terms. Prices are flexible. You can often negotiate the price of a contract, just as you would the price of a used car or a trade-in vehicle. Likewise, since service contracts are sold separately from the sale of a motor vehicle, a company cannot require you to purchase a service contract as a condition of a loan or car purchase.

Your Right to Return. If you buy a service contract and decide that you no longer want it, you have the right to return it to the provider for a full refund—if you return it in a timely manner. You may return the contract to the provider within 20 days of the date the contract was mailed to you, or within 10 days if you received the contract at the time of sale, for a full refund.

Further Information. If you have a question or a complaint regarding a service contract, you may contact the Minnesota Attorney General’s Office or the Department of Commerce as follows:

Office of Minnesota Attorney General Lori Swanson
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
TTY: (651) 297-7206
TTY: 1-800-366-4812

Minnesota Department of Commerce
85 East 7th Place, Suite 500
St. Paul, MN 55101
(651) 539-1500

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