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What Is the Difference Between a Service Contract and a Warranty?

  Norman Taylor & Associates
  February 5, 2024

When purchasing a vehicle, it’s common to come across terms such as warranties and service contracts. While these may sound similar, there are major differences between the two.

Our experienced California lemon lawyer explains the difference between service contracts and warranties, their pros and cons, and what consumers should know before making a decision here.


What Is a Warranty?

A warranty is a guarantee provided by the manufacturer or seller of a product. It promises to repair or replace the product if it has any defects or fails to meet certain quality standards. Car warranties, for example, are often provided by auto manufacturers and typically apply to new vehicles. 

There are two main types of warranties: express warranties and implied warranties.

Express Warranties

An express warranty is explicitly stated by the manufacturer or seller, either in writing or verbally. It guarantees that the vehicle will meet specific standards or qualities. If the car fails to meet these standards during the warranty period, the manufacturer is obligated to repair or replace it.

Implied Warranties

Implied warranties are automatically applied by law and provide a base level of consumer protection. The most common type is the implied warranty of merchantability, which ensures the vehicle is fit for its intended purpose, conforms to industry standards, and meets quality expectations. Another type is the implied warranty of fitness, which guarantees the product is suitable for a specific purpose known to the seller.


What Is a Vehicle Service Contract?

A vehicle service contract provides maintenance or repair services for a specified period of time. It’s an optional coverage that consumers can purchase separately from the vehicle.


Is a Service Contract an Extended Warranty?

Service contracts and extended warranties are functionally equivalent to each other. The consumer pays the seller or manufacturer an additional amount for protection against product defects beyond those covered by the express and implied warranties. In some cases, a service contract may actually be an express warranty. 


Pros and Cons of Buying a Service Contract

Service contracts can offer certain benefits for consumers, but they also come with drawbacks.


  • Extended coverage: Service contracts can provide coverage beyond the manufacturer’s warranty, offering peace of mind knowing your repairs will be taken care of. 
  • Budget planning: For those who want to budget for future repairs, service contracts allow for predictable costs. 
  • Flexibility: Service contracts can be tailored to specific needs, such as covering high-mileage vehicles or adding extra coverage for certain parts.


  • Cost: Vehicle service contracts can be expensive. These contracts are high-margin items for dealerships and are designed to generate profit. 
  • Overlapping coverage: In many cases, service contracts overlap with the manufacturer’s warranty; this means you may end up paying for coverage you don’t need during the warranty period. 
  • Limitations and exclusions: Service contracts often have exclusions and limitations on what’s covered. You should carefully review everything to understand which parts and breakdowns are included.

It’s important to note that the price of a service contract usually depends on a few things: the car’s make and model, whether it’s new or used, and how much coverage and time you want. They can range from hundreds to thousands of dollars or even higher.


Where Does the California Lemon Law Come In?

The California lemon law provides protection for consumers who purchase or lease vehicles with substantial defects that can’t be repaired within a reasonable number of attempts.

According to California’s lemon law, if a car can’t be fixed after several tries under warranty, you should be eligible for a refund or a new one. But with a service contract, even if there are over a hundred failed repair attempts for the same major defect, you might not get restitution or your replacement.


Contact Our California Lemon Law Firm Today!

If you believe you have a lemon car and are facing difficulties with the manufacturer or dealership, contact Norman Taylor & Associates today! Our California lemon law firm specializes in helping consumers navigate their rights. Call 818-244-3905 to schedule a FREE consultation and explore your options.

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