What can I expect from the dealer when I try to cancel my extended warranty?

December 19, 2007 4:44 PM

So I didn't research as much as I should have, and I financed my new 2008 Toyota today with the extended warranty. Now it sounds like I should have waited or gotten other quotes, but with all the number juggling, I lost sight of the bottom line. I'm going back to the dealer tomorrow to cancel the extended warranty. Can I expect the dealer to try to change the APR or any other aspect of the financing of the car?

I called Toyota Extra Care customer service, and it sounds like I can either talk to the dealer to redo the agreement without the extended warranty price included or cancel through Toyota Extra Care in a few weeks. I think the dealer might then take this opportunity to raise the interest rate. But if I wait to cancel through Toyota, then my monthly payments won't go down, I'll just see the warranty price subtracted at the end of the loan. I'm not sure my stomach can take a renegotiation, but it feels like they'll be "keeping" my refund for 3 years.

Sorry for the long question, just new car buyer jitters and regrets.

posted by lychee to travel & transportation (12 comments total)

my monthly payments won't go down

Getting buyers to concentrate on their monthly payment is the very best tool car dealers have for getting them to lose sight of the bottom line. So stop doing that.

Focus on the total amount of all the payments added together. If you remove the extended warranty, the total amount should be reduced by the cost of the warranty plus all the interest you won't be paying on it as well. If that's the case, then they aren't keeping any more money from you.
posted by grouse at 4:52 PM on December 19, 2007

When you cancel the warrenty you will wait some number of weeks at the end of which you will receive a check.

You can use the check for anything you want, but the best thing to do is apply it to the loan. Deposit it, then send your financing company (Toyata? A bank?) a check for the amount. Make sure you make it clear you want to apply the full amount to the principle, not pre-pay the next N monthly payments.

Alternatively, use it to prepay the next N monthly payments. You don't save anything on interest, but you don't have to make payments for awhile.

Whatever you do, your monthly payment amount will not go down. To do that, you'll have to re-finance--essentially apply for another loan. Interest rate will probably be higher if you do that.
posted by jeffamaphone at 5:01 PM on December 19, 2007

You can always cancel the whole deal and go to another dealer.
posted by jeffamaphone at 5:02 PM on December 19, 2007

I'm not so sure about shopping around for other extended warranties. A lot of these cheaper (i.e. non-Toyota, stuff you find with Google) warranties can be more trouble than they are worth if you actually need to make a claim, and if they go out of business, then you are out of luck.

You can, however, negotiate on a Toyota (or any other dealer's) extended warranty. If you took the first price they gave you, you paid way too much. If you were able to whittle it down a bit, you probably didn't do too bad.
posted by 4ster at 6:17 PM on December 19, 2007

Before you go back to the dealer you should review your paperwork and figure out exactly what the total amount should be minus the warranty and interest. Don't let the dealer do the math -- you're setting yourself up to get manipulated. You need to be firm with the amount you calculated. If the dealer tries to deviate at all be prepared to show your calculations and call him/her on it. If this isn't something you can stomach it may be better to do it through Toyota directly. However, you'll be better off and more confident in yourself if you can pull it off successfully at the dealer.

Then do what jeffamaphone outlined with the warranty refund.
posted by junesix at 6:24 PM on December 19, 2007

I made the first-time-buyer mistake of getting the extended warranty on my first vehicle 2 years ago. Within 30 days, I submitted a cancellation to the dealership in writing, and they submitted it back to the bank, who then applied it to the balance, and recalculated the monthly payments based on the adjustment.

So if you do cancel through the dealer (which you have the right to do) then they should just send it through the bank who will then recalculate your monthly payment from there, and let you know what your new payment will be.

Based on experience only, mind you.
posted by benjh at 8:08 PM on December 19, 2007

With Toyota, you have 3 years/36,000 miles to buy the extended warranty. You can buy it from ANY Toyota dealer, and any Toyota dealer must honor it. Check out www.warrantyshack.com/quotes/toyota/ and also Google for "Toyota extended warranty." In particular, Prius owners like myself have shared where to buy genuine Toyota platiunum warranties at the cheapest price, due to our concerns about the possibility of expensive repairs to our highly technical cars. The same warranty purchase strategies should work for whatever model Toyota you purchased.

During the first 3 years/36,000 miles, the extended warranty does nothing for you except provide transportation assistance if your vehicle has warranty repairs that take more than a day to complete. Toyota Extra Care provides a set dollar amount per day with a limit on how many days per repair visit. Also, if your car needs repairs lasting for more than one day, while you're more than 150 miles from home, the Toyota Extra Care provides $100/day for food/lodging, up to 5 days over the lifetime of the Toyota Extra Care agreement.

Unless you think those two benefits are important, you might be better off to use the first three years to save money to purchase an extended warranty in cash, and save yourself paying any finance charge on it.
posted by Joleta at 9:08 PM on December 19, 2007 [1 favorite]

First: if you're feeling like you didn't do enough research, cancel the order altogether and start over (if you're in a position to do so.) Start from the price you can get on CarsDirect and go down from there (but matching their price is a fine place to end up.)

Second: extended warranties carry a high profit margin for the dealer, and the company offering them. There's a reason for that. Joleta's advice above is worth reading twice.
posted by davejay at 12:20 AM on December 20, 2007

Oh, and going forward, don't be afraid to run the numbers yourself, raise it as an issue if your numbers don't match theirs, and ask questions about things that concern you. I'm good with words, good with numbers, and good with negotiating...and I still have a heck of a time getting straight numbers and straight answers out of dealership financing guys.

When I think of the sandlot moves I've experienced, like getting to the end of the negotiation, then getting handed a paper to sign that has the destination charge twice -- but obviously so, presumably so that I'd notice that and ask it to be fixed (and not notice they'd bumped the interest rate by two percent!)

Never be afraid to walk away; I'm not recommending you abuse 'em, as they're just trying to make a living, but you owe them nothing. If they treat you well (ie with honesty and transparency and efficiency, not schmoozing and compliments) buy the car from them at the right price, and if not, don't -- and if you change you mind, they'll sell you a car even if you insulted them repeatedly before you walked out the first time. It's about the bottom line for them, and should be for you as well.
posted by davejay at 12:25 AM on December 20, 2007

Thanks all. The car's in the driveway, so I can't walk away or cancel the order. I'm just dreading the confrontation with the dealer when I go back tomorrow, though I now know I legally have 30 days to cancel the extended warranty and get it deducted from my total loan.
posted by lychee at 1:28 AM on December 20, 2007

Don't be nervous. If they give you a hard time, just say something like, "We both know that Toyota produces some of the most reliable cars ever made. That's why I purchased one. You sound like you're not so sure. I hope that isn't the case."
posted by 4ster at 5:06 AM on December 20, 2007

Well, I went with my dad and brother, and though they brought in the manager to do the hard sell, we got the warranty canceled. Hope the cancellation doesn't get "lost in the mail," but I can always contact Toyota directly to check on the status. Thanks all for the reassurance.
posted by lychee at 1:40 PM on December 20, 2007