This is, in my experience, not untypical behavior from car dealers and warranty providers. They're tough to deal with. I suspect this was a used car? This is probably subject to the "Lemon Law" and the dealer may be subject to violations of the Consumer Protection Statute, c. 93A. Feel free to get in touch with me to discuss this further.
The Massachusetts Used Vehicle Warranty Law protects consumers who buy used vehicles from a dealer (or private party) in Massachusetts. Remember to maintain complete records from the day you buy your vehicle, keep a diary of problems and repair attempts including the dates of service, the problem you reported and mileage at the time of repairs. See this site for more information: http://www.mass.gov/ocabr/business/autos-transportation/lemon-law-used.html (The link is also provided below.)
None of the information or materials posted above is intended to constitute legal advice. Viewing this does not constitute an attorney client relationship. Local counsel should always be consulted before contemplating any legal action. The above information is general in nature and should not be undertaken without the express advice of an attorney of your choosing.
You have a host of options available to you. Under MA lemon law you may have claims against the dealer. You may also have claims against the service contract company. You may even have additional claims against the dealer for refusing to allow you to revoke your acceptance of the vehicle, improperly telling you it would be considered a repo. I hope you have most or all of this in writing.
Contact someone who deals in lemon law and autofraud in your area right away. Find someone competent here: