Can You Cancel an Extended Car Warranty?

Extended car warranties, often called vehicle service contracts, provide coverage for repairs after a manufacturer’s original warranty expires. These agreements can generally be canceled, and the ability to terminate coverage and the resulting refund depend on the specific terms outlined in your individual contract.

Key Contractual Provisions

Before initiating cancellation, carefully review your extended car warranty contract for specific details. The contract’s cancellation clause outlines the conditions for termination, including any applicable fees, which commonly range from $25 to $50. It also identifies how your refund will be calculated, often based on a pro-rata method considering either unused time or remaining mileage.

The contract also details whether the warranty is transferable to a new owner if you sell the vehicle, and how this impacts your ability to cancel. You should also note the effective date of cancellation as defined by the contract terms. The document identifies the party responsible for processing cancellations, which could be the original dealership, the warranty administrator, or the finance company if the warranty was included in your vehicle loan.

Steps for Cancellation

Once you have a clear understanding of your contract’s terms, identify the correct contact for submitting your cancellation request. This contact might be the dealership’s accounting department, the warranty administrator, or your lienholder if the warranty was financed. The dealership’s accounting department is often responsible for processing cancellation paperwork.

You will generally need to submit a formal cancellation request, often requiring a written letter or a specific form from the warranty company. This request should include your policy number, vehicle identification number (VIN), and the current odometer reading. Gathering supporting documentation, such as proof of vehicle sale if applicable, is also recommended.

After submitting your request, obtain confirmation of the cancellation. Keep copies of all submitted forms, letters, and any other correspondence for your records. Following up regularly with the processing entity helps ensure your request moves forward and confirms termination of coverage.

Understanding Your Refund

Once cancellation is approved, the refund amount will be calculated. Most extended warranties provide a prorated refund, meaning you receive a portion of the original purchase price based on unused time or mileage. For example, if you cancel a five-year warranty after one year, you would generally be refunded for the remaining four years, less any applicable fees. Factors that can reduce the refund amount include cancellation fees. If any claims were paid out under the warranty before cancellation, those amounts may be deducted from your refund.

The refund recipient depends on how the warranty was originally paid. If you paid for the warranty in full at the time of purchase, the refund will typically be issued directly to you. If the warranty was financed and included in your car loan, the refund amount will generally be sent directly to your lienholder, reducing your loan’s principal balance. Processing time for refunds typically ranges from four to six weeks. If a refund is significantly delayed or appears incorrect, review your documentation and contact the company for clarification.