Car buyers are often pressured to buy an extended car warranty, so named because it takes effect to cover repairs after the new car warranty expires, even though they don’t know your odds of using it or what it actually costs.
For those with buyer’s remorse, there’s good news: Most warranties can be canceled and you will be refunded a prorated amount.
‘An expensive bet’
Extended warranties, often called “vehicle service contracts,” are sold by the finance and insurance manager while creating your sales contract. These warranties cover repair costs for different periods of time or miles driven after the bumper-to-bumper manufacturer’s warranty ends.
There are factory warranties, backed by the automaker, with repairs done with original manufacturer parts, as well as third-party warranties that often require you to request a refund and use replacement parts.
Consumer Reports, which called the extended warranties “an expensive gamble,” found that the median price for coverage was just over $ 1,200. Results from the 2013 survey, the most recent, showed that 55% of homeowners who purchased an extended warranty did not use it. And “those who used it spent hundreds more on coverage than they saved on repair costs,” on average, the survey found.
Andy Meisler, a retired Los Angeles journalist, was offered an extended warranty when purchasing a Toyota Prius, but chose not to take that bet.
After driving the car for 10 years, Meisler said: “That car never needed more than routine maintenance. And our unsecured status never cost us a little sleep. “
Reasons to cancel
Although an extended warranty is presented as protection against costly future repairs, here are some scenarios that may make you decide to cancel it:
I do not agree: Some buyers find that an extended warranty was slipped into your car finance deal without your knowledge or agreement. Then, the term of the loan is extended to hide the extra expense.
Cost: Warranties are often sold as a monthly purchase; Some buyers then total the cost of the warranty for the duration of the contract and find that it is much more expensive than they were led to believe.
Exclusions: Extended warranties don’t cover everything that can go wrong. After reading the fine print, some car owners decide that the coverage is not worth the cost.
Postponement: If you bought a new car, the extended warranty does not go into effect for at least three years. Some people would rather keep that money in their pocket, at least for now.
How to get your money back
You can cancel an extended warranty at any time and get a prorated refund for the unused portion of your policy. If collateral was included in your loan, your car payment will not be reduced, but you can pay for the car before the refund is deducted from your balance.
Consider these tips to make the cancellation process as simple as possible:
Read the fine print. Look up your policy documentation to see who to contact and if there is a cancellation fee. If you recently purchased the extended warranty and do not have the contract yet, call the finance manager who sold it to you. For third party warranties, you may need to call or write a letter to the company.
Be strong. When you talk to the finance manager, keep in mind that you are taking away the commission you earned by selling the policy to you. It might be less disruptive and quicker to contact the dealership office manager to process your request, suggests Used-Car-Warranty.com.
Just say no. “ When you call a warranty company, know that they will likely transfer you to a retention department where the staff are trained to pressure you to stay with them. Don’t feel compelled to justify your reasons for canceling, just keep saying “no.”
Get it in writing. You may need to fill out a cancellation form, so be sure to get a copy signed by a dealer representative. Keep copies of your cancellation form or letter and any other relevant documents.
Tracing. Set a reminder to confirm that your cancellation is complete. You can check your loan statement or contact your lender.
Peace of mind
This is not to say that everyone should cancel their extended warranties. Many people agree with the often-used sales pitch that a warranty provides peace of mind, something that is difficult to put a price tag on.
Although cars have gotten more reliable, when something goes wrong, “it tends to be a disaster,” says Scot Hall, a former dealership CFO and executive vice president of Swapalease, a commercial leasing site. This, he says, is largely due to the increased use of electronics and the computerization of vehicles.