Question:  Can I cancel an extended warranty that I feel the dealer forced on me on a car I just bought?

June 3, 2005

I purchased a new Toyota 4-runner this past weekend, May 27 to be exact. I unfortunately purchased the extended warranty as I was under a lot of pressure and the finance manager knew this.

I now wish to cancel that coverage and it is my understanding that I have the right to do so, I'm just not sure what the time limit is. It is 7 days today that I signed the purchase agreement. I purchased the vehicle in AZ but live in NM. Do you know if I can cancel? It was a 84 mo/100,000 extended warranty.

Thank you

Mary Lou G.

Answer:

Hi Mary Lou,

You can cancel an extended warranty any time you want to. You must understand however, the amount you get back is pro-rated based on the time and the mileage used up. There may also be a cancellation fee charged by the warranty company. You'll have to read the fine print of the warranty to determine this.

Also, if you financed your new vehicle, and the warranty was included in the total amount financed, the refund will go directly to your bank. They probably will not change your monthly payments, but the total amount you owe will be reduced by the amount of the refund.

In order to cancel the warranty you must go to the dealer where you purchased the vehicle, and probably deal with the same Finance Manager. Tell them you want to cancel the warranty. They should have you sign a cancellation form with the date and mileage currently on your vehicle. Don't leave without getting a copy of the signed form.

The problem is that the dealership made a profit on the warranty, how much is hard to say, and the Finance Manager made a commission selling it to you. Now, when the warranty is canceled there will be a charge back to the dealer for the profit earned and there will be a charge back to the Finance Manager for his or her commission. Since the warranty was just sold they will lose their entire commission! Too bad! That's what they get for shoving a warranty down your throat!

Because of this charge back situation, the dealer and/or the Finance Manager may sit on the paper work that they are supposed to forward to the warranty co. in order to process your refund. If you don't get a copy of the signed cancellation form, and you simply take their word that they will cancel your warranty, and they sit on it, your refund will get smaller and smaller as they wait. This is why you must get a dated copy of the refund cancellation form. It will protect you if they drag their feet.

Even under normal circumstances a refund may take several months. You will have to keep bugging the Finance Manager until the transaction is complete. You may also want to find out who the dealership Office Manager is, because this person may ultimately be the one who handles the transaction with the warranty company.

Good luck . . .

Tony Iorio