How to cancel GAP or an extended warranty for a refund

Most products sold in the dealer's finance office are optional, separate contracts. The CFPB says that if you added an optional product to your loan, you have the right to cancel it during the loan. Your contract sets the exact terms, like how to cancel and how your refund is figured. Add-ons you can usually cancel include:

• GAP (guaranteed asset protection), sometimes called a GAP waiver. It covers the difference between what you owe and what your insurance pays if the car is totaled or stolen.
• Extended warranties, also called service contracts. They pay for certain repairs. The FTC notes they aren't warranties under federal law, because you buy them separately from the car.
• Other protection plans, like tire-and-wheel protection, prepaid maintenance, key replacement, or paint and fabric protection. Many of these can be canceled too. Check each contract.

Before you cancel GAP, check whether you still owe more than the car is worth. If you do, you may still want gap coverage. Your own auto insurer may sell it, so compare prices before you drop it.

If an add-on ended up in your contract without your OK, say so in your letter and any complaint, and ask for a full refund. The FTC warns that dealers sometimes slip add-ons into the paperwork without explaining them.

Each add-on usually comes with its own contract, separate from your sales and loan papers. Look for a section called “Cancellation” or “Refund.” It tells you:

• Who to send your request to: the dealer, the administrator, or both. The administrator is the company that handles the contract for the seller, often including claims and cancellations.
• How to send it, such as by mail or on a specific form.
• What to include, like your current mileage or proof that your loan is paid off.
• How the refund is figured, and any cancellation fee.
• Any early window when you get a full refund.

Can't find your copy? Ask the dealer, your lender, or the company named on the product. The CFPB points people to those same three places.

1. Write a short cancellation letter. Include your name, address, the car's VIN, the contract number, the purchase date, and a clear line like “I am canceling this contract and request a refund of the unused amount.” Sign and date it. If the contract or the administrator has its own cancellation form, fill that out too. Ask for it if you don't have it.
2. Add what the contract asks for. That often means your current mileage, sometimes on a signed odometer statement form. If your loan is paid off, include the payoff letter or lien release.
3. Send it where and how the contract says, often to both the dealer and the administrator. If the contract lets you choose, use certified mail with a return receipt, or email and keep the reply confirming they got it.
4. Ask for written confirmation that the contract is canceled, plus the refund amount and where it's going.
5. Set a reminder to follow up if you haven't heard back in a few weeks.

After any early full-refund window, refunds are usually prorated. You get back the unused share of the price, based on time or miles, as your contract spells out. There may be a cancellation fee, and repairs or claims already paid can shrink the refund.

Some states set limits. In California, for example, you get a full refund on a service contract canceled within 60 days (30 days for a used car without a factory warranty) if you haven't made a claim and you send the notice the way the contract says. After that, the fee is capped at $25 or 10% of the price, whichever is less. Rules vary by state, so check your contract and your state's rules.

GAP protects a loan. Once that loan is paid off, the GAP has nothing left to cover, so you may be owed the unused part. The CFPB says this can apply if you sell the car, refinance, or pay off the loan early.

Some lenders arrange the refund for you, but don't count on it. CFPB examiners have found loan servicers failing to make sure borrowers got these refunds. Send your own cancellation request with your payoff letter, and follow up.

Refinancing? Your old GAP doesn't carry over to the new loan. If you still owe more than the car is worth, look at gap coverage for the new loan. A service contract is different: it covers the car, not the loan, so it can keep going after payoff. If you don't want it anymore, cancel it yourself.

Sold, traded in, or totaled the car? The service contract covers a car you no longer have, so cancel it for a prorated refund. If you sold the car, some contracts let you transfer the coverage to the buyer instead, sometimes for a fee. Send proof with your request, like the bill of sale, your trade-in paperwork, or your insurer's total-loss letter. After a total loss, this refund is easy to miss while you deal with the insurance claim.

Some dealers drag their feet on refunds. You shouldn't have to jump through hoops. CFPB examiners found it abusive when loan servicers made customers visit a dealership twice in person to cancel an add-on. Keep pushing, in writing.

1. Follow up in writing. Give the date of your first request, attach a copy, and ask for the refund by a set date.
2. Contact the administrator directly. Its name and contact details should be on the contract. If you financed the add-on, ask your lender too.
3. File a complaint with the office that fits your problem, from the list below.

Where to complain:

• Your lender or loan servicer won't credit the refund: the CFPB complaint form. It covers vehicle loans and leases.
• A GAP or service contract company won't cancel or pay: your state insurance department. It oversees insurers and, in many states, service contract companies.
• The dealer won't process your request: your state attorney general or consumer protection office.
• Any service contract problem: you can also report it to the FTC at ReportFraud.ftc.gov.

Keep everything: the add-on contract, your letter, proof of delivery, every email, notes from each call (date, name, and what was said), and the loan statement that shows the credit.