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How to cancel an extended car warranty

Save money by scrapping a policy you'll probably never use.

Also called vehicle service contracts, extended warranties cover repair costs after your manufacturer warranty ends. But because many require you to meet a deductible before they’ll pay for repairs, these warranties are rarely worth it. The median cost of an extended warranty was around $1,200 in 2013 — despite most repairs costing less than that.

If you bought one on impulse and have since come to regret it, canceling your extended warranty could put hundreds of dollars back into your pocket.

How to cancel an extended warranty

Extended car warranties aren’t set in stone. Most dealerships and third-party companies allow you to cancel it at any time to receive a prorated refund. Follow these steps to get started:

  1. Review your policy. Your policy should list information on how to cancel and any fees you might have to pay. If not, contact the customer service team of the company you purchased the warranty from to ask what the process is.
  2. Stay patient and stand your ground. When you cancel an extended warranty, the company you bought it from stands to lose money. Because of that, you often have to jump through hoops to reach the right person and confirm that you want to cancel multiple times. Stay patient and stand your ground — you don’t have to stick with a policy you don’t want.
  3. Save a copy of your cancellation form. You’ll likely need to fill out an online cancellation form or submit a request in person. Keep a copy of this so you can check up on the status and ensure you get your prorated refund.
  4. Follow up with the company. Confirm that your cancellation has been processed and follow up if you haven’t received your refund after a few weeks.

3 reasons to cancel your extended warranty

If you’re still on the fence about your extended warranty, here are three reasons why you might want to pull the plug:

  • Adds to the total cost of your loan. If you wrapped your extended warranty into your car loan, you’re paying interest on something you may never use. Canceling can help you avoid that extra cost.
  • Multiple exclusions. An extended warranty can be limited. If yours only cover minor repairs — but requires a large deductible — it may be worth canceling and saving up for potential repairs yourself.
  • You have to wait to use it anyways. An extended warranty on a new car won’t kick in until after the manufacturer warranty ends. And since extended warranties can be purchased at any time, you could save yourself hundreds of dollars by canceling it now and renewing it when you need it.

Why you may want to leave it in place

An extended warranty does have one benefit: peace of mind. Sales teams bank on this by offering a low monthly payment in exchange for potential savings on repairs down the road. It could be worth it if you’ve bought a used vehicle or one known for mechanical problems.

Around 55% of people never use their extended warranty, according to a 2014 Consumer Reports study. But that means 45% of people do — and that shouldn’t be discounted.

There may come a time when you need an expensive part replaced. And an extended warranty could make the difference between paying a small deductible and having to spend thousands for a repair.

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Bottom line

If you’ve decided to cancel your extended warranty, stick to your guns and don’t let up. But if you’re on the fence, check out our guide to extended warranties and car loans to help you make an informed decision.

Frequently asked questions

How much of a refund can I expect?

Refunds are prorated, which means the amount you receive will be calculated based on the time that has passed since you first bought the warranty. The sooner you cancel, the more you’ll be refunded.

What should I do if I never agreed to an extended warranty?

If you find paperwork for an extended warranty you never agreed to, contact a lawyer. They can walk you through the next steps and help you determine if you’ve been scammed.

When is an extended warranty worth it?

An extended warranty can be helpful for some people — especially if you bought a car that frequently needs repairs. But it all depends on how much it costs, what it covers and the deductible required before coverage kicks in.

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