Believe it or not, there are ways to improve your car contract even after the ink is dry on the bill of sale.
Although you can’t lower the price of your car, you can usually cancel any extras you might have felt pressured to purchase at the finance office. You can also shop around for a lower interest rate and cheaper insurance.
Due to the pandemic and the resulting supply chain issues, dealerships have fewer cars to sell. The demand for cars is high, so they charge each sale with additional products.
“I’ve seen up to $6,000 worth of shit added to the sale of a Honda Civic,” says Christopher T. Smith, a California attorney who handles auto claims for Glassey Smith – and a former car dealership himself. “A lot of people sign without reading the contract and only find out when they get home and read the contract.”
You may very well have read the contract and signed anyway, as many dealerships make these extras a condition of sale.
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Common add-ons are the extended warranty – priced between $2,000 and $7,000 for luxury cars – and insurance gapcosting up to $1,000 at a dealership but available elsewhere for around $200, Smith says.
Most insurance products — extended warranties, wheel and tire coverage, “protection packages” — can be voided, Smith says. Other add-ons are in a ‘grey area’, such as alarms and maintenance plans, and will be harder to cancel or remove from the car.
1. Request a refund
Most people finance their car, so the extras are built into the loan, says Matt Jones, Marketing Director at TrueCar. Therefore, if you are able to remove additional products, the refund is deducted from the loan balance. Your monthly payment does not decrease, but you repay the loan faster.
If you cancel within 30-60 days, you will receive a full refund. If you wait longer, a small processing fee may apply and the refund will be pro-rated.
Before canceling a extended warranty, Jones said “to think about it for a long time”. The warranty is transferable and will sweeten the deal when selling to an individual. But if the warranty hasn’t expired and you’re going to trade in your car, cancel it “so you don’t leave money on the table.”
The cancellation procedure
It is not surprising that the dealer does not facilitate the cancellation of these lucrative contracts. The CFO who sold you the extras “has a $200 incentive not to let you cancel,” Smith says. This is because they will lose the commission they receive for convincing you to buy it.
Here are the steps to cancel your extended warranty and any other insurance plans you may have purchased:
- Review your contract. If you have the contract, look for the section on cancellation. In some cases, you must submit a written form and possibly have your car’s mileage checked by the dealership.
- Check online. Most manufacturers will have cancellation policies on their website. They can be hard to find but are often found in the FAQ section. If a written form is required for cancellation, it may be available for download from the Website.
- Expect pushback. If you call the CFO to cancel, he might try to drag his feet until his commission is guaranteed, Smith says. Instead, go up the chain of command and contact the CFO or dealership office manager.
- Document everything. Keep notes and record who you’ve spoken to and what needs to be done. Make copies of all required forms.
- Set reminders. Don’t assume friendly assurance from the dealership means they will void the contract. Verify that your request has been met. In your calendar, set a follow-up date.
2. Refinance at a lower rate
If you financed through the dealership without seeking a loan first, you could end up with a higher interest rate than you could have obtained on your own. The good news is that you can refinance your car loan at any time and potentially get a lower interest rate.
It’s easy to shop around lenders to refinance a car and see the different rates offered. If your credit score improves, you can always try again later. Remember that the interest rate adds an additional cost to the loan over time. Lowering the rate by even one percentage point will be a big saving.
3. Reassess your insurer
When you’re buying a new car, it’s a good time to review your insurance coverage and your carrier. You may need (or be required to have) higher coverage on your new car. Competing insurance companies may charge less than your current company and even add a discount for new customers to sweeten the deal. Compare auto insurance rates and the cover might be worth your time.
And while you research quotes, you can determine the price of gap insurance and compare it with the coverage the dealership sold you. It also means you won’t have to pay interest on the insurance you were charged for on the car loan.
Before committing to a new carrier, give your current insurer the chance to beat your new price, especially if you have a local agent.