Believe it or not, there are ways to improve your car deal even after the ink is dry on the sales contract.
While you can’t lower the price of your car, you can usually cancel the extras you might have felt pressured to buy in the finance office. You can also shop for a lower interest rate and cheaper insurance.
As a result of the pandemic and related supply chain problems, dealers have fewer cars to sell. Demand for cars is high, so they're loading each sale with extra products.
“I’ve seen as much as $6,000 of crap added to a Honda Civic” sale, says Christopher T. Smith, a California attorney who handles auto-related complaints for the firm of Glassey Smith — and a former car dealer himself. “Many people sign without reading the contract and only find out about them when they get home and read the contract.”
You may very well have read the contract and signed anyway, as many dealers make these extras a condition of sale.
Common add-ons are the extended warranty — sold for between $2,000 and $7,000 for luxury cars — and gap insurance, costing as much as $1,000 at a dealership but available elsewhere for about $200, Smith says.
Most insurance products — extended warranties, wheel and tire coverage, “protection packages” — can be canceled, Smith says. Other add-ons are in a “gray area,” such as alarms and maintenance plans, and will be more difficult to cancel or have removed 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're able to remove additional products, the refund is deducted from the loan balance. Your monthly payment doesn’t go down, but you pay off the loan more quickly.
If you cancel within 30-60 days, you'll receive a total refund. If you wait longer, there might be a small processing fee and the refund will be prorated.
Before canceling an extended warranty, Jones says to “give it a good long thought.” The warranty is transferable and will sweeten the deal when selling to a private party. But if the warranty hasn’t expired and you're going to trade in your car, cancel it “so you don’t leave any money on the table."
The cancellation process
Not surprisingly, the dealership may not make it easy to cancel these lucrative contracts. The finance manager who sold you the extras “has a $200 incentive not to let you cancel,” Smith says. That’s because they'll lose the commission they get for talking you into buying it.
Here are the steps to take to cancel your extended warranty and any other insurance plans you might have purchased:
- Review your contract. If you have the contract, look for the section on cancellation. In some cases you're required to submit a written form and possibly have your car’s mileage verified by the dealer.
- Check online. Most manufacturers will have the terms of cancellation on their website. They can be hard to find but are often located in the FAQ section. If a written form is required for cancellation, it might be available for download from the website.
- Expect pushback. If you call the finance manager to cancel, they might try to drag their feet until their commission is secured, Smith says. Instead, go up the chain of command and contact the finance director or the dealership’s office manager.
- Document everything. Keep notes and records of who you spoke with and what needs to be done. Make copies of all the forms that are required.
- Set reminders. Don’t assume a friendly assurance from the dealership means that they'll cancel the contract. Verify that your request has been met. In your calendar, set a date to follow up.
2. Refinance for a lower rate
If you financed through the dealership without first shopping for a loan, you might find you're being charged an interest rate that’s higher than one you might have gotten on your own. The good news is that you can refinance your car loan at any time and possibly get a lower interest rate.
It’s easy to shop lenders to refinance a car and see the various rates offered. If your credit score improves, you can always try again later. Remember that the interest rate adds extra cost to the loan over time. Lowering the rate by even a percentage point will be a big savings.
3. Reassess your insurance carrier
When you buy a new car, it’s a good time to review your insurance coverage and carrier. You might need (or be required to have) higher coverage on your new car. Competing insurance companies might charge less than your current company and even add a new-customer discount to sweeten the deal. Comparing car insurance rates and coverage could be worth your time.
And while you're checking for quotes, you can price out gap insurance and compare that with the coverage the dealer sold you. This will also mean you won’t have to pay interest on the insurance you were being charged in the car loan.
Before you commit to a new carrier, give your current insurer the opportunity to beat your new price, especially if you have a local agent.