Extend Auto Warranty Refund??

I am a resident of NJ. In January of 2005 I purchased a used SUV form a small dealership in my town. The salesman encouraged me to purchase an extended warranty seemed a good idea at the time. I did so. I was told by the salesman that I could cancel the contract at anytime and get a pro-rated refund back.
When the gasoline prices started to go up a few months later, I decided to trade in the SUV for a new car, a small one, with better gas mileage. I purchased it from a different local dealer. When I completed the trade, I contacted the warranty company to cancel the contract. I was told by a rude woman that because I had already traded the car, I had voided my contract and was NOT entitled to any refund. I was not transferring the contract, I simply wanted to cancel it. I saw nothing in the fine print of the contract that said I could not get a refund. I should have received at least $1000.00 back. The dealership I had purchased the SUV from tried to fight with them also, but the warranty company refuses to budge.
Would it be worth it for me to take them to small claims court? My husband and I work very hard for the money we make and that money is a large loss for us to take. How should I handle this?