I just bought my new EX CVT last night and the total out the door price deal I got was $20,304, which was pretty good to me. However, low and behold when sitting and signing all the paperwork in the finance office I ended up signing for the extended warranty which is bumper to number coverage for 7yrs/100,000 miles for an extra $2,300, which I'm having major second thoughts about now.... that's a lot of extra money.

This is my first time buying a new car so I don't know if extended warranties are worth the extra investment. Please can anyone give me some much needed advice on this? I believe I can still cancel it.

 

You can cancel it. Read the extended warranty contract the dealer provided and look for cancellation provisions. It will explain what the process is. If you decide to cancel, I would both email and call the finance guy that sold it to you and let him know your wanting to cancel. Email so you have a record of your intent. Call as well. Be prepared for him to try and talk you out of it. He is making a huge commission on that transaction, and will fight to protect it. He may also try and discount the warranty, just to save something of the sale. You will need to return to the dealer and re-sign your paperwork, reflecting the removal of the warranty. Don't wait, deal with it right away. Take the money you were going to spend on the warranty and put it in savings (self insure), even if you can only afford to do it a little each month.

Good luck!

 

As usual, Vanguard has excellent advice.


When I asked the forum about buying any of these additive plans, I got a resounding no to purchase.

 

$2300. is too much to pay for that. I paid about $1200. for an EX with Nav. Tell the finance guy you want to cancel and see if he/she will come down in price.

 

You can buy an extended warranty from any dealer, not just where you bought your car. Back in '06, I bought a 7 year 120K mile extended warranty for my '07 Fit from College Hills Honda College Hills Honda: Honda Care VSC Information, Benefits and Coverage for $700. My dealer wanted $1500.

 

I'm not sure if the extended warranty is handled by the Honda Care arm of Honda, but if it is, in addition to emailing the dealer pronto to say you would like to cancel, you could call Honda Care and try to get the cancellation paperwork from them directly. I did this when I canceled my Honda Sentinel service. I told them I would like to avoid schlepping to the dealer to get the paperwork, and the woman kindly emailed me the paperwork, which I filled out and send back to them directly. I followed up, and then received a letter confirming cancellation. I did it early enough (within 60 days I think) to avoid a prorated refund.

 

If you finance with a credit union you can get an extended warranty for about $500. The dealership warranty isn't really any better.

 

Yes, cancel the thing.

With a warranty you are paying for anticipated repairs, the commission for the sales guy, the salaries of the company providing the coverage, their fancy offices, etc. If you don't need service your money is gone.

They're gambling that your car will require less than $2300 in repair between the end of the factory warranty and the end of their warranty. That's a pretty sure bet!

You're gambling that your car will need more than $2300 in repairs in the same period. It isn't likely to happen.

Better to put the money in the bank and sit on it. If you need repairs it will be there, if not you will have it to spend on the next car.

One possible issue is if your financed the extended warranty with the car through the dealer. They might make it difficult to alter the finance agreement from the agreed-on terms. Watch the numbers carefully.

 

Thank you everyone for the much needed sound advice, you all make some very valid points Wish I had all your wisdom last night before I made the boneheaded move of signing for the warranty....

I have decided to cancel it. Plan on contacting the finance guy today about it. Will I have any problems with the financing deal I got though since the warranty got put into the loan? I was pre-aproved for the car loan with my credit union with a rate of 2.49% for 60 months but the finance guy was able to get me a better rate of 1.9% for the same length of time through Honda so decided to go with them instead.

 

Doubt you'll have a problem cancelling the warranty and getting a refund. You still will however, have pay interest on the financed amount.

 

Since you let him arrange financing, he may try and tell you that the fee you paid for the extended warranty was partially used to "buy down" your rate, and that if you cancel, you will lose your financing. Since you have the pre-approved credit union loan, just go with it. Not much difference between 1.9% and 2.49% in the scheme of things. He really did not do you any favors, since amortizing the $2,300.00 (plus the tax on that amount), over the term of your loan, is going to cost you more in interest and increased payment each month, than the difference between the two rates would. Trust me, lose the $2,300.00 charge (+ tax), take the Credit union rate and you will come out ahead. Remember also that your credit union will be able to sell you gap insurance for hundreds less than a dealer will (should he try and sell you that as well).

If you act fast enough, you may be able to avoid the cancellation process and just have him re-submit the paperwork, reflecting the decreased purchase price. If not, he may tell you that your payment will stay the same, and that the refund will be applied to the back end of the loan. In that case, simply refinance the loan he provided with your Credit Union, get a lien release from Honda finance, and then cancel the extended warranty, submitting the lien release with the request directly to whoever provided the extended warranty, and they will send you the refund directly. You can then apply the refund to your car loan, or just put it in the bank to self fund your future repair savings account.

 

I am one of the few people here who purchased the dealer warranty. The same one you are canceling. I paid $1,200 and that included splash guards, wheel locks, cargo tray and all weather mats. I was okay with that deal but I would not have paid what you were charged.

 

If you have signed the papers and driven the car off the lot, most likely you will not be able to change the terms of the loan. In my experience, I did exactly what you did in buying the warranty and canceling within 30 days. I went for it initially because I wanted to read the details of the warranty, and I knew that if I didn't want it I could cancel it. To cancel mine, it said to write a letter directly to the warranty company, so I did just that and sent it certified through the mail. Contacted the company after they received it, and they told me that they directly send a check to the bank loaning the money. The bank then reduced the principal by that amount, but my monthly payment was still the same. So in the end I will end up paying the loan off faster while paying less in interest. Look at it as making a bigger down payment

 

Except here in Florida unfortunately, thanks to the State Gov. Can't use College Hills at all. So if you are in Florida, forget a good price if you ever wanted the Extended Warranty

Florida is the only state that looks at warranty as insurance policy (the state regulates what a dealer can charge).

 

Originally posted by richlee
If you have signed the papers and driven the car off the lot, most likely you will not be able to change the terms of the loan. In my experience, I did exactly what you did in buying the warranty and canceling within 30 days. I went for it initially because I wanted to read the details of the warranty, and I knew that if I didn't want it I could cancel it. To cancel mine, it said to write a letter directly to the warranty company, so I did just that and sent it certified through the mail. Contacted the company after they received it, and they told me that they directly send a check to the bank loaning the money. The bank then reduced the principal by that amount, but my monthly payment was still the same. So in the end I will end up paying the loan off faster while paying less in interest. Look at it as making a bigger down payment


The reason your warranty company sent the check to the original finance company was because you did not provide a lien release, which you could only obtain if you refinanced before requesting the warranty cancellation. Since the OP has a pre approved loan with his credit union, he is in a position to refinance right away, get the lien release, submit his warranty cancellation (with the lien release), and have the refund sent directly to him.

 

You're right. If you refinance you can get your monthly payments adjusted. The warranty company had mentioned this, but it would have meant a trip back to the dealership finance guy and more paperwork. I didn't mind the payments so this worked out fine for me.

 

When giving out advice for things such as contracts we all need to be aware of the persons state which is asking the question

OP is in California which allows cancellation within 60 days for any extended warranty or service plan. After that time the contract is given a pro-rated refund

Source:

Extended Warranties and Service Contracts

Personally I would not buy an extended warranty, especially one for more than 10% of your puchase price.

 

I note that Consumer Reports does not reccomend paying for an extended warranty on a new car.

 

I was always of this mindset, but I changed it when an extended warranty would have saved me $4,000 with my previous car. I felt that the $650 I paid (approx) was worth the extra four years and 50,000 miles.

 

Boy, did they take you. Typical extended warranties on Fits run 500 to 700 for 100k miles.
And anyway extended warranties are a poor investment. check consumer reports, most consumer sittes, even edmunds.