What is a vehicle service contract, and how does the FTC's used-car rule treat one?

A vehicle service contract is a written agreement, sold for an extra charge, to repair, replace, refund or maintain a vehicle. This guide explains that definition and what a used-car dealer must tell you about one, using the text of the FTC's used-car rule.

The short answer

The definition: in the FTC's Used Motor Vehicle Trade Regulation Rule, a "service contract" is "a contract in writing for any period of time or any specific mileage to refund, repair, replace, or maintain a used vehicle and provided at an extra charge beyond the price of the used vehicle," unless offering it is "the business of insurance" regulated by state law.¹
The difference from a dealer warranty: under the same rule a "warranty" is a written undertaking to do those things "provided at no extra charge beyond the price of the used vehicle." A service contract costs extra.¹
What the Buyers Guide says: if a dealer makes a service contract available, the Buyers Guide on the vehicle must say it "is available for an extra charge" and tell you to "Ask for details about coverage, deductible, price, and exclusions."¹
What this page does not cover: this source is the used-car dealer rule only. It does not describe how claims are paid, what a contract costs, or how a state licenses a provider.

Service contract versus warranty: the "extra charge" test

The rule defines the two terms side by side. A warranty is "any undertaking in writing, in connection with the sale by a dealer of a used vehicle, to refund, repair, replace, maintain or take other action with respect to such used vehicle and provided at no extra charge beyond the price of the used vehicle" (§ 455.1(d)(5)). A service contract is a written contract, for any period of time or mileage, to refund, repair, replace or maintain a used vehicle, "provided at an extra charge" (§ 455.1(d)(7)).¹ In plain terms, using this rule's wording: what comes included in the price is a warranty; what you pay extra for is a service contract.

The service contract definition has an exception: it does not apply where offering the contract is "the business of insurance" and that business is regulated by state law.¹ Which side of that line a given product falls on depends on state law, which this source does not address. Our guide to mechanical breakdown insurance versus a service contract and state-by-state pages cover that.

What the Buyers Guide must say about a service contract

Before offering a used vehicle for sale to a consumer, a dealer must prepare and display the "Buyers Guide" on the vehicle (§ 455.2(a)). If the dealer makes a service contract available on the vehicle, the dealer must add a service contract section and mark the "Service Contract" box, unless offering it is the business of insurance regulated by state law (§ 455.2(b)(3)).¹ The required text reads:

"A service contract on this vehicle is available for an extra charge. Ask for details about coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of your purchase of this vehicle, implied warranties under your state's laws may give you additional rights."¹

Two things follow from the rule's own text. First, the Buyers Guide names the questions to ask: coverage, deductible, price and exclusions. Second, the notice links buying a service contract within 90 days to your state-law implied warranties; our page on "as is" sales and service contracts explains that point.

The Buyers Guide is part of the sale contract

The information on the final version of the window form "is incorporated into the contract of sale" and "overrides any contrary provisions in the contract of sale" (§ 455.3(b)). A dealer may not make statements, oral or written, that alter or contradict the required disclosures (§ 455.4).¹

Who the rule covers

The rule applies to a "dealer," meaning a person or business that sells or offers for sale a used vehicle after selling or offering for sale five or more used vehicles in the previous twelve months. Banks and financial institutions, businesses selling to their own employees, and lessors selling a leased vehicle to the lessee are excluded (§ 455.1(d)(3)).¹ A service contract bought from someone other than a used-car dealer, or on a new vehicle, is not described by this source.

How to verify this yourself

Read 16 CFR Part 455 on the eCFR (reference 1). The text above reflects the version we read on 2 October 2026; the eCFR page notes its amendment history.¹
Ask the dealer for the Buyers Guide copy and read the "Service Contract" box and paragraph. Ask for the contract itself before you decide.
To see how we check providers of vehicle service contracts, use the Register and our standard. They explain the method; they are not a recommendation.

What this page is not

This is general information, not legal advice. It describes one federal rule for used-vehicle dealers. It does not say what any particular contract covers, whether one is worth buying, or how your state regulates it. See also our guides on extended warranties versus manufacturer warranties, the FTC Used Car Buyers Guide and service contracts, and how to compare vehicle service contracts.

Last reviewed 2 October 2026. General information from the cited primary sources; not legal advice.