GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Service Contract


Synonyms:agreement, guarantee, warranty
Filed Under: automotive
Tags: automotive
 

Definition of service contract

service contract
1. A type of contract that covers certain vehicle repairs after the manufacturer's or dealer's warranty expires. Extended warranties are sold by vehicle manufacturers, dealers, and independent companies. With a new vehicle, the extended warranty must usually be purchased by the end of the first year of ownership. Also called an extended warranty.

Related Terms and Acronyms:

  • closed-end lease   The most common type of car lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs, such as the disposition fee, and the lease agreement is over. In a closed-end lease, the lender assumes the risk of predicting the value of the vehicle (its residual value) at the end of the lease's term. Closed-end lease payments are somewhat higher than open-end lease payments.
  • contract   An agreement between two or more parties that can be enforced by law.
  • extended warranty   A service contract that covers certain vehicle repairs or problems after the manufacturer's or dealer's warranty expires. Extended warranties are sold by vehicle manufacturers, dealers, and independent companies. With a new vehicle, the extended warranty must be purchased by the end of the first year of ownership.
  • home owners warranty (HOW)   A policy that guarantees workmanship on construction of a home and functionality of some appliances, and which pays for repairs for a specified period.
  • home warranty   A policy that guarantees workmanship on construction of a home and functionality of some appliances, and which pays for repairs for a specified period.
  • lease (lse)   A written agreement in which the property owner allows a tenant to use property in exchange for rent, and for a specified period. Or, a written agreement in which a car dealer allows a consumer to use a vehicle in exchange for payments for a specified period.
  • open-end lease   Sometimes called a finance lease. It usually offers lower payments, but carries a risk for the consumer. Under an open-end lease, the lessee must pay any difference between the residual value of the car as stated in the lease and the fair market value of the car, if lower, at the end of the lease. The lessor pays for the appraisal that sets the value. If the consumer doesn't agree with it, the consumer may pay for a binding, independent appraisal by someone agreed to by both parties.
  • options   Also known as add-ons. These are features added to the car often by the dealer such as a CD stereo, anti-theft system, detailing and undercoating. Some items are purely decorative, known as "mop and glow," and do not add any value to the car.
  • warranty   A document certifying clear title to a property.

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