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Dealer Refuses to Cancel an Extended Warranty
This is Dan Whitney with the Whitney Law Firm in Towson, Maryland. You probably found this video because you’re trying to figure out what to do when the dealer refuses to cancel an extended warranty. So, I’ve been a lawyer for about 10 years. Part of my practice is suing car dealerships. I sue them for a lot of different reasons including when they refuse to cancel the warranty.
So, the first step is how did the warranty get purchased? Did the customer actually want to buy the warranty or were they deceived into thinking that they had to buy the warranty? Plenty of people want to buy warranties or vehicle service contracts or other aftermarket products that you have the right to cancel later.
You Are Not Required To Buy An Extended Warranty to have Financing Approved
Other times the car dealership will tell a customer that in order for financing to be approved they are required to purchase the warranty, vehicle service contract, prepaid maintenance, gap insurance, whatever it is, as a term of the financing approval. Because what they’ll say is the bank wants you to protect your investment. And if you don’t know better or you don’t know otherwise you might think, “Well okay, I guess it’s reasonable. I guess I have to buy this $1,000, $2,000, three, $4,000 product.” The truth is I have not seen a bank that requires anybody to purchase a warranty, or vehicle service contract, or prepaid maintenance or gap insurance to have their financing approved. But it’s an easy way for car dealers and finance managers in particular to make extra money, to sell another product and to get their commission and overall profit to be higher. Of course, money is the main reason for why they don’t let you cancel the warranty or other aftermarket product.
So, usually the reason that they don’t let you cancel it, many people want to cancel within the first 90 days, sometimes it happens after but a lot of times it’s in that first 90 days after the person buys it, then they think about it and they realize, “You know what? I don’t think I really need this thing. I’ve got enough protection with the manufacturer’s warranty.” Or, “I know good mechanic, I’d rather just have my couple of thousand dollars back.”
The Dealer Does Not Want to Cancel for at least 90 Days
Here’s what usually happens, finance managers if they’re able to sell a warranty and it doesn’t get canceled within 90 days, 90 days is the usual industry standard, if a warranty gets canceled within 90 days the commission gets taken out of the finance manager’s pay plan, they’re going to have to pay it back if they were already paid on it. If they can somehow postpone it until after 90 days they will get to keep all the commission they made. Of course, what that means for the customer is they’re probably not going to get a full 100% refund after 90 days. They might only get a pro-rata reduction of maybe 95 or 90% or something else. So that’s why a lot of times within 90 days the dealership will refuse because they want to get paid. The finance manager wants to keep their money. However, sometimes if it’s over 90 days the dealership may simply say to itself and their employees who the customer is dealing with, “I’m not going to make any money by taking my time to process the cancellation and send it to the product administrator. So what am I doing? I’m just not going to waste the time.” And they say, “No.”
Now of course the customer has the right to cancel products as long as it’s in the contract terms and it usually is. And customers should know that they have legal rights and that when a dealership refuses to honor the terms of the contract and refuses to process the cancellation the customer has legal rights and they can fight back. And usually the best way to do that is to hire an experienced attorney and sue the dealership. A lot of times they ignore letters because there’s no concern. Plenty of people write letters and it’s easy to ignore. It’s not so easy to ignore a lawsuit which is why what I do is I usually just file the lawsuit. That gets their attention much more quickly.
So I hope this has been helpful. If you have any more questions or if you need a free consultation, which all of our consultations are, feel free to call us. We handle cases primarily in Maryland. This is Dan Whitney with the Whitney Law Firm in Towson. You can call us at 410-583-8000 or visit our website at www.whitneyfirm.com. Thanks a lot and I’ll see you next time. Take care.