What is the purpose of an automobile service contract?

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brettd | High School Teacher | (Level 2) Educator Emeritus

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This is a contract typically made between an individual and a car dealership when a person is buying a new car.  Often times, the service contract comes as part of the price of the car in that all the scheduled maintenance that is not covered by the warranty (which covers malfunctions and breakdowns), such as oil changes, tire rotations, etc, will be covered under the contract for a certain period of time, or a certain number of miles driven.

So the contract becomes a selling point for the car, and also sometimes people simply like to purchase such contracts because it gives them peace of mind that they will not have to pay for or worry about any servicing needs in the near future.

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