Ok, I need to vent for a minute.
Every automotive related website seems to post advertisements offering the sale of “extended warranties”. I even have an affiliate source which I will not allow on this site because they are labeling the products they sell as extended warranties.
A "warranty" is defined as coming with the sale of a product and is included (at no extra charge) in its purchase price.
An "extended service contract" is an optional agreement for product service that is available for purchase. It provides additional protection beyond what the warranty offers on the product.
Extended service contracts are similar to warranties in that both concern service for a product. However, there are important differences.
Section 106 of the Magnuson-Moss Warranty Act describes a warranty as “part of the basis of the bargain”.
Service contracts on the other hand, are agreements that are separate from the contract or sale of the product. They are separate either because they are made some time after the sale of the product, or because they cost the customer a fee beyond the purchase price of the product.
If you offer a service contract for sale, the Magnuson-Moss Warranty Act requires you to list conspicuously all terms and conditions in simple and readily understood language. Unlike warranties, however, extended service contracts are not required to be titled “full” or “limited”. They are also not required to contain the special standard disclosures. Using warranty disclosures, as noted by AFIP, could confuse customers about whether the agreement is a warranty or an extended service contract.
For a booklet containing texts of the Magnuson-Moss Warranty Act, the related FTC Rules, and the FTC Warranty Advertising Guides, send a written request to:
Federal Trade Commission
Consumer Response Center
Washington, D.C. 20580
Let’s all try to do it the right way. Call it an extended service contract not an extended warranty.
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Friday, November 21, 2008