Believe it or not, there are ways to improve the treatment of your car even after the ink on the sales contract has dried.
While you can’t lower the price of your car, you can usually cancel extras you may have felt pressured to buy at the finance office. You can also look for a lower interest rate and cheaper insurance.
As a result of the pandemic and related supply chain issues, dealerships have fewer cars to sell. The demand for cars is high, so they load each sale with additional products.
“I’ve seen up to $6,000 in junk added to the sale of a Honda Civic,” says Christopher T. Smith, a California attorney who handles auto-related complaints for the firm of Glassey Smith, and a former car dealer. “Many people sign without reading the contract and only find out when they get home and read the contract.”
Chances are good that you read the contract and signed it anyway, as many dealers make these extras a condition of sale.
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Common add-ons are extended warranty, which sells for between $2,000 and $7,000 for luxury cars, and gap insurance, which costs up to $1,000 at a dealership but is available elsewhere for around $200, Smith says.
Most insurance products — extended warranties, wheel and tire coverage, “protection packages” — can be canceled, Smith says. Other add-ons are in a “grey area” such as alarms and maintenance plans and will be more difficult to cancel or remove from the car.
1. Request a refund
Most people finance their car, so the extras are included in the loan, says Matt Jones, director of marketing for TrueCar. Therefore, if you are able to remove additional products, the refund is deducted from the loan balance. Your monthly payment doesn’t go down, but you pay off the loan faster.
If you cancel within 30-60 days, you will receive a full refund. If you wait longer, there may be a small processing fee and the refund will be prorated.
Before canceling an extended warranty, Jones says to “think it over.” The guarantee is transferable and will sweeten the deal when sold to a private party. But if the warranty hasn’t expired and you’re trading in your car, cancel it “so you don’t leave money on the table.”
The cancellation process
Not surprisingly, the dealership does not make it easy to cancel these lucrative contracts. The finance manager who sold him the extras “has a $200 incentive not to let him cancel,” says Smith. That’s because they will lose the commission they get for convincing you to buy it.
Here are the steps to take to cancel your extended warranty and any other insurance plans you have purchased:
- Check your contract. If you have the contract, look for the cancellation section. In some cases, you must submit a written form and possibly have the dealer verify the mileage on your car.
- Check online. Most manufacturers will have their cancellation terms on their website. They can be hard to find, but are often found in the FAQ section. If a written form is required for cancellation, it may be available for download from the website.
- Wait for recoil. If you call the finance manager to cancel, they may try to hold off until your commission is secured, Smith says. Instead, go up the chain of command and contact the CFO or dealer office manager.
- Document everything. Keep notes and records of who you talked to and what needs to be done. Make copies of all required forms.
- Set reminders. Don’t assume that a friendly guarantee from the dealer means they will cancel the contract. Check that your request has been answered. On your calendar, set a date for the follow-up.
2. Refinance to a lower rate
If you financed through the dealership without seeking a loan first, you may be charged a higher interest rate than you could have gotten on your own. The good news is that you can refinance your car loan at any time and possibly get a lower interest rate.
It’s easy to shop around for lenders to refinance a car and see the different rates they offer. If your credit score improves, you can always try again later. Remember that the interest rate adds an additional cost to the loan over time. Reducing the rate by even one percentage point will be a huge savings.
3. Re-evaluate your insurance company
When you buy a new car, it’s a good time to review your insurance coverage and company. You may need (or should have) more coverage on your new car. Competing insurance companies may charge less than your current company and even add a discount for new customers to improve the deal. Comparing car insurance rates and coverage could be worth it.
And while you’re reviewing the quotes, you can determine the price of differential insurance and compare it to the coverage the dealer sold you. This will also mean that you will not have to pay interest on the insurance that was being charged on the car loan.
Before committing to a new company, give your current insurer a chance to beat their new price, especially if they have a local agent.