Bank Loans and Car Warranty Premiums

How Does the Insured Get the Cancellation Refund

I was standing in line at the bank this week when I overheard a customer asking the teller when the bank was going to give her the refund on her Car Warranty she purchased when she recently bought a new car.

Here is what she had done:

1. Bought a new car
2. Bought the new car warranty coverage from the dealership
3. Paid for the car and the warranty with the loan from the bank
4. Cancelled the warranty coverage
5. Asked the car dealer who sold her the warranty coverage for the refund
6. Car dealer told her she would have to get the refund from the bank since they had the loan

Where did the refund money from the warranty company go?

If the bank had been a premium finance company, the insurance / warranty company would have a record of that and would have sent the refund back through the premium finance company.

But the bank is not a premium finance company. That raises the question...

"Should a bank loan money to pay for a warranty policy - essentially an insurance policy?"

Is the insured just trying to scam the bank loan?

The loan customer supposedly borrowed say $20,000 for the car and $3,000 for the warranty. The loan customer is now trying to get part of that loan back as cash.

Presumably the loan amount is not reduced by the cancellation of the warranty policy. If the loan customer had cancelled the purchase of the car - meaning sold the car - the loan would have to be settled.

Seems kinda tricky to me.

Do you know the answer?

I do not, but I am interested. Please leave a comment to explain.

Thanks.