Go to another dealer....no immobolizer chip in there...they're either lying or don't know what they're talking about. I ordered one for my S70 (also '98) and it cost me $25.00 from the dealer. All I needed was to give them my VIN# and in a couple of days (after they ordered it from their supply house) I picked it up. Prices for these keys and what they tell you seems to vary greatly from dealer to dealer.

Now, if you're talking about the remote, there is some truth to what you were saying. You can actually get one from eBay (make sure it's identical to your original one) and take it to the dealer, claiming it quit working...never tell them it was from eBay, and they will have to reprogram all of your remotes along with the new one, but still, my dealer charged $35 total for the remotes' reprogramming. Up to 3 remotes can be programmed for your car at the same time.

Hope this helps.
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1998 S70 T5 Emarald Green Metallic, 2004 V70 2.5T Ruby Red, Previous Owner of Black '94 850 Turbo Wagon. My cars have been running so well lately they've got me worried.