Definitions for "Service Contracts"
The Fund has a strong preference for contracts to be limited to a period of twelve months duration, with full mitigation on termination. However, there may be circumstances in which the use of fixed period contracts of longer durations may be appropriate and consideration will be given to each case on its merits.
The application of tax to service contracts, extended warrantees, and maintenance agreements depends on the nature of the contract.
Service contracts and extended warranties are basically insurance policies. The consumer pays an additional amount to the seller or a third party for protection against defects beyond those that are covered by the manufacturer's express and implied warranties. Such contracts are not, however, manufacturer's warranties do not extend your rights under California's Lemon Law statutes. The manufacturer is not required to reimburse you for these contracts if the vehicle is repurchased, but the full or partial premium may be separately recovered from the seller of the contract upon cancellation.