How much you actually get back when you cancel a vehicle service contract

Our Used Car Buyers Guide page covers the one federal rule that touches this product directly. It's worth being precise about what that rule doesn't do: it doesn't give you a right to cancel, or say how much money comes back if you do. Those questions are answered entirely by state law — state by state, the same way the licensing questions covered throughout this Library are.

The FTC's rule is about disclosure, not cancellation

The Used Car Rule, 16 C.F.R. Part 455, requires a dealer to post a specific window sticker before a sale and to honor what it says about warranty coverage. It says nothing about a buyer's right to cancel a separately purchased vehicle service contract afterward, or what a refund should look like if they do. Whether cancellation is even available, how long a buyer has, and how the refund is calculated are all state-law questions — and the three states below that spell the formula out plainly in their own statutes don't agree with each other on the details.

California: a 60- or 30-day full look, then a formula

California Civil Code § 1794.41 gives a buyer 60 days from receiving the contract on a new vehicle, or 30 days on a used vehicle without remaining manufacturer warranty coverage, to cancel in writing. If no claim was made against the contract during that window, the refund is the full price paid. If a claim was made during that same window, the refund drops to a pro rata amount instead — being inside the free-look period doesn't guarantee the fuller refund by itself. After the window closes, every cancellation gets a pro rata refund based on elapsed time or an objective measure of use, such as mileage or the retail value of service already performed. Either way, the seller can subtract a cancellation or administrative fee — capped at whichever is lower, 10% of the contract's price or $25.

Florida: 100% minus claims paid inside 60 days, 90% after

Florida Statutes § 634.121 works differently. A purchaser who cancels within 60 days gets 100% of the gross premium paid, minus any claims already paid on the contract, minus an administrative fee capped at 5% of the gross premium. Cancel after 60 days instead, and the statutory floor drops to not less than 90% of the unearned pro rata premium, again less claims paid. If the company itself cancels the contract rather than the buyer, the rule flips in the buyer's favor: the company owes at least 100% of the unearned pro rata premium, minus claims paid, with no administrative fee taken out.

Washington: a 30-day window with the fee timed to the day

Washington Revised Code § 48.110.075 splits its own 30-day window in two. Return the contract in the first 10 days and the refund is the full purchase price with no fee at all. Return it between day 10 and day 30 and the full refund still applies, but the provider can subtract a fee of up to $25. After 30 days, refunds switch to pro rata by elapsed time or mileage, still capped at that same $25 fee — and if the provider doesn't actually pay the refund within 30 days of getting the contract back, Washington law adds a 10% penalty on top of what's owed.

The same rough idea, three different formulas

All three states share the basic shape our exclusions guide describes for reading any service contract closely: a free-look period with fuller protection, then a pro rata formula afterward. But the specifics genuinely don't transfer between states. California and Washington both condition the fuller refund inside the window on no claim having been filed yet; Florida instead nets claims paid out of a flat 100%-of-premium figure rather than switching formulas over a filed claim. The fee caps aren't even the same shape: a flat dollar cap in Washington, the lesser of a percentage or a dollar figure in California, a straight percentage of the premium in Florida. A formula borrowed from the wrong state will produce the wrong number.

What this means for a buyer

Find your own state's actual statute — an insurance-code service-contract provision, a service-contract-act provision, or a motor-vehicle consumer-protection provision — rather than assume one of the three formulas above applies by default; point 3 of our standard requires the same state-specific check for licensing, and cancellation rights deserve the same discipline. Send cancellation notice in writing, keep a copy and proof of delivery, and calculate the refund you're owed yourself using your own state's actual formula before accepting whatever number a provider offers first.

A contract can promise more than its state requires, never less: if your written contract's own cancellation clause is more generous than your state's statutory floor, the contract wins. Read it closely anyway — "more generous" is not what's usually printed there.