Extended car warranties sound like a great idea, but they often come with nearly impossible terms and high costs. When people put the pieces together, they want to cancel it. It might seem difficult, but financial experts have laid out plans for people who want to cancel their extended warranty.
It usually goes something like this: you’re buying a used car, worried that maybe the car has an unknown issue that’s soon going to need repair. To compensate for the fear, the dealership is ready to provide a seemingly fantastic resource, the extended car warranty. Financial gurus advise you to pass.
Extended car warranties are not as great as people make them out to be. In fact, roughly only a quarter of people who purchased an extended warranty are happy with the results. Many people realize they paid a lot of money for a plan that doesn’t cover many repairs let alone maintenance costs.
When drivers realize the average lifespan of a vehicle is only twelve years, this adds insult to injury. Extended car warranties should reduce the risk of buying an older vehicle; instead, they often inflate the price without providing benefits that are deemed worth it by most consumers.
Is an Extended Warranty Plan Worth It?
If you want to cancel the extended warranty you purchased for a car, then you need to be prepared to do your homework. With a little reading, negotiating, and a couple of phone calls, you could be out of that bad deal in record time.
Financial experts from sources like NerdWallet and reddit have written on the task of cancelling extended warranties for cars, and the compiled information contains many tips and tricks to make it happen.
The problem with extended car warranties is that they are essentially a bet. You gamble with your own money on what type of car problems your vehicle will have in the future. It’s like betting $4,000 that your car will need to have the engine replaced in the next five years.
If you’re right, you win! The cost is covered (or mostly covered). If you’re wrong, you’re out the funds. To make matters worse, many used car dealerships are more than happy to roll the fee of the extended warranty into the monthly payments, making it seem like you’re getting a deal when you are not.
These extended warranties often go by another name: vehicle service contracts. It’s usually the responsibility of the financial representative to sell these policies, making it seem like a life or death situation in the process.
Additional note: don’t pay for overlapping coverage! Sometimes factory warranties are still in play, and the dealership still tries to sell buyers an extended warranty. Don’t fall for this common trap.
The average price of coverage is about $1,200, but there are plenty of cases where unsuspecting consumers shelled out a lot more.
A 2013 report showed that 55% of people who bought such a policy weren’t ever able to use it. In this case, it’s money down the drain.
Why do People Cancel their Extended Car Warranty?
Asking the question Can I Cancel my Extended Car Warranty? should begin with an analysis of why people want to cancel in the first place.
Some drivers realize that the protection they once thought was a good idea really isn’t worth it in the end.
A different situation has arisen in the past: nonagreement. This occurs when the dealership sneaks an extended car warranty into the loan without your consent. Since you didn’t agree to it, you shouldn’t have to participate.
Others want to cancel when they bust out their calculator to do some simple addition. They realize that the per month cost of this extended warranty is astronomical, and they want out.
One of the most common scenarios that leads drivers to cancel their car’s extended warranty is witnessing just how limited the coverage is. The driver heads into to the shop thinking they won’t have to spend a lot of money, and when nothing’s covered, they’re left with a huge bill.
Remember that extended car warranties are almost never worth it for a new vehicle, especially if you are the type of consumer who changes vehicles every 3-5 years.
How do I Cancel My Extended Warranty?
People generally want to learn how to cancel their car’s extended warranty policy when they realize how expensive (and useless) it is.
You can save some money by doing so; often the prorated amount is returned to the driver. Don’t expect your payment to drop, though. Instead, the car will be paid off sooner as the amount is removed from the final balance. The loan payments are not recalculated.
Here’s how to make it happen:
- Read the terms and conditions. Bust out your magnifying glass and call a lawyer because you’re going to have to study the fine print. See what options you have for cancellation.
- Not all vendors provide contracts. In other cases, owners didn’t hold onto it. You can call or write the company that provides the warranty to ask for the contract.
- Get the manager on the line and use your firm voice to state that you are cancelling. They are trained in the art of persuasion, so they may try to bully you into keeping the policy. Stand tall and don’t back down.
- If you’re told you can’t back out due to the contract, ask where in the contract this regulation is stipulated. Seek legal advice if necessary.
Other tips regarding extended car warranties:
- Don’t be duped by third-party offers. Mailers and phone calls often try to convince people that they should buy this policy. You are under no obligation to purchase (or even entertain the conversation). Just hang up the phone if you’re not interested!
- Get everything in writing if you cancel.
There are plenty of people who do love their extended car warranties. In general, this is the lucky minority who ended up with a car problem that was covered by the policy. However, this isn’t that common.
Routine maintenance isn’t covered in most extended warranties, so you will still pay for problems like timing belt replacement or annual inspections and oil changes.
Are Extended Car Warranties a Waste of Money?
Whether extended car warranties are a waste is a matter of opinion. You must check the conditions of your vehicle (make, model, and year) as well as how much you can afford the risk of paying for the pricey coverage.
Extended car warranties aren’t cheap. On average, consumers are likely to spend between $300 and $700 per year on an extended car warranty. For some people, that’s like an extra month of rent or a mortgage payment!
If the car never requires covered repairs, then yes, the money is technically wasted. Some people disagree, however. They argue that the peace of mind offered by knowing major problems are under warranty make it easier to sleep at night. For them, assurance is everything.
Factory Warranty VS. Extended Warranty
A factory warranty is standard when purchasing a brand-new model from a car dealership. In general, car shoppers are offered at least three years (or 36,000 miles) of coverage. Of course, some deals are sweeter. You should check with your local car dealership for specific details and promotions.
It isn’t highly recommended to buy extended warranties for new vehicles as they usually don’t break down right out of the gate. If they do, it’s often covered under a recall (or the regular warranty). If you can afford the repairs should they occur, then the cost of the extended warranty likely isn’t worth it.
Some extended warranties are offered by the maker of the car. Others are offered by third parties who make a profit out of collecting funds that don’t usually make it back to the car owner in the form of repair compensation. Instead, the company keeps the revenue.
If the extended warranty policy comes from the factory it might be called OEM (original equipment manufacturer). This is common with companies such as Ford or Honda.
One type of extended warranty is specifically designed to cover transmission issues. This is known as the powertrain warranty.
The other type is called a limited warranty. Some folks refer to it as a bumper-to-bumper policy. Although it sounds like a grand idea in theory, it is important to see that the most likely costs you will pay are related to regular maintenance (oil changes, brakes, windshield wiper blade replacement, etc.).
Such repairs are typically NOT covered by an extended warranty.
The Verdict is In on Car Extended Warranty Cancellation
Cancelling an extended warranty for a car doesn’t have to be a complicated process. Simply do your homework, make the call, and keep pushing forward.
People like buying extended car warranties because they feel that they are getting a type of insurance to cover the risk of buying a vehicle; however, many find out that these policies are too expensive and/or do not cover as many problems as they originally thought.
For this reason, we always recommend reading the terms and conditions closely when making vehicle purchases. Do not let salespeople rush you through processes with which you are unfamiliar. If it helps, considering bringing a friend or family member who knows the industry.
If you’re on the fence about buying an extended warranty, keep in mind that third-party and opt-in options exist. You don’t have to give into the pressure to lock down an extended warranty at the time of purchase. In fact, doing so will likely drive up your total cost as well as your monthly payments.
Instead, set some money aside each month so you are prepared for an unexpected car repair bill. If the day never comes, you’ll have a nice chunk of change you can use for a down payment on your next automobile.
In some cases, you can change your mind after the fact. Review the fine print to see if you have the typical 30-day window to cancel the policy. If you’re a real stickler, you could try to keep the policy in place for 29 days just in case. Then, ask for the refund without penalty.
Just remember that the dealerships often get a kickback from selling these extended warranties. As people say, if something’s too good to be true, then it probably is. That is the case for these policies.
The Other Option: The Junkyard Plan
Dropping a lot of money for car repair, especially for older vehicles, can be a real headache! It seems like every month some new problem is springing up. Last month it was the failing car air conditioning system. Now it’s the head gasket. What will it be next time? The transmission!?
When you are finding yourself spending thousands of dollars a year on car repairs, and the extended warranty isn’t helping or is non-existent, then you might be wondering what the most economically efficient decision is. It may be calling up the local junkyard for assistance.
The junkyard will recycle your automobile, providing a win-win exit strategy for the car owner. The tow truck will arrive at your house to pickup the car. Sign over the title and collect the cash payment.
Once the deal is done, you can head on down to the dealership and buy a new car that won’t be such a financial burden.
At the end of the day, every driver will weigh the pros and cons of buying an extended car warranty on their own. However, if you bought one and now want to cancel, remember that you do have options.