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Warranties and Service Contracts

Produced by Based upon article from the National Consumer Law Center, MLRI
Reviewed December 2019

Warranties, As Is and Service Contracts

The Federal Trade Commission (FTC) requires dealers to put a “Buyers Guide” sticker on all used cars. The Buyers Guide tells you if

  • there is a warranty,
  • no warranty (“AS IS”). You have to pay for all repairs yourself or,
  • implied warranties.

A warranty is a promise to repair the car.

If the dealer makes oral promises that are not on the Buyer’s Guide Label, get them in writing. If you cannot, look elsewhere for a car. After you buy the car, you must get a copy of the buyer’s guide. If changes were made on the terms of the purchase warranty, the buyer’s guide must be revised to state these changes. The Buyer’s Guide is a part of your contract with the dealer, and will prevail over any contradictory terms.

Warranties

Implied warranties are created by local law and automatically come with any used car purchase unless you agree in writing that they do not apply. If you buy the car “as is” or a “with all faults” then the warranties do not apply. Implied warranties are the:

  • warranty of merchantability, a warranty that the car will work, and,
  • warranty of fitness for a particular purpose. For example, a warranty that if the dealer sells you a car telling you it will haul a trailer, that it will be able to haul a trailer.

Dealer warranties can be either full or limited. Limited usually means you will have to pay many repair costs. A full warranty means the dealer will make necessary repairs, replace the car if it cannot be fixed and among other terms, that the implied warranties are not limited. Under federal law, you have a right to see the warranty regardless of whether it is full or limited.

Unexpired manufacturer’s warranties mean that the original manufacturer’s warranty may still cover the car. Look for this in the “systems covered/duration” section of the Buyer’s Guide label. Some warranties cannot be transferred or expire automatically when sold. Either of these may mean the car is no longer covered. Sometimes you must pay a fee to transfer the manufacturer’s warranty to a second owner. To find out if the warranty is transferable to you:

  • ask the dealer to show you the unexpired warranty, and
  • contact the car’s manufacturer and tell them the car’s Vehicle Identification Number (VIN).

Service contracts may be a rip-off.

Before you pay extra for a service contract, look at your manufacturer’s and seller’s warranties. You may already have a warranty which covers the same service. What is the cost of the most expensive repair? You do not want the price of the service contract to be higher than the cost of servicing or repairing the car. Even though the contract may say that it covers your car “bumper to bumper,” it may exclude more of your car than it covers. Also look to see if:

  • there is a deductible,
  • if the service contract covers incidental expenses like towing and renting another car while waiting to get car back,
  • where can you get the car routinely serviced, does it have to be only where purchased?, and
  • if there are costs for canceling the service contract.

The service contract may run longer than you need. If so, see if you can transfer it later or if you could get a shorter contract for less money.

If you chose to buy a service contract, get written confirmation of the service contract.

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