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