The dealer said I had to buy an extended warranty. Is that true?


No.  Dealers commonly tell car buyers that they need an extended warranty in order to obtain financing.  That is false.  The simple fact is, dealers can make much better profits from the sale of extended warranties and insurances, than from the sale of the actual car.  These items are commonly marked up 300% and more.  Dealers will say a lot of things to make that sale.

“Extended Warranty” is the commonly used name for “service contracts”, and “Service contract” is how this item is listed on a vehicle purchase contract.  A buyer can cancel the service contract through the Service Contract Administrator and received a pro-rated refund, usually without having to submit a reason for the cancellation.  Likewise, a buyer can also cancel GAP Insurance through the GAP Insurance Administrator in the same manner. The administrators’ contact information is contained in the buyer’s copy of the Service Contract and GAP Insurance, respectively.

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