Warranty: what does it mean in Canadian car loans?

In Canadian car loans, "warranty" primarily refers to an extended service contract, an optional add-on purchased to supplement or extend beyond the vehicle's original manufacturer's warranty. These extended warranties are frequently presented during the finance and insurance (F&I) process at dealerships and, if accepted, are almost always financed directly into the car loan. This significantly inflates the principal amount borrowed, meaning the consumer not only pays the upfront cost of the warranty but also accrues interest on that amount over the entire loan term, potentially adding thousands to the total repayment. Under various provincial consumer protection acts across Canada, such as Ontario's Consumer Protection Act or Alberta's Fair Trading Act, dealerships are obligated to clearly disclose these as optional products, detailing their separate cost before they are added to the loan. Furthermore, extended warranties are subject to provincial sales taxes-HST in harmonized provinces (e.g., Ontario, BC, Nova Scotia) or PST/GST in others (e.g., Quebec, Manitoba, Saskatchewan)-which further increases the financed amount and the interest paid. For the borrower, understanding these implications is paramount, as it directly impacts the total cost of ownership, monthly payment affordability, and long-term financial commitment, necessitating careful consideration of its value, coverage, and whether financing it is truly the most financially prudent choice in the current 2025 market.