is the dealership scamming me?

[jmata1977]

Back story. I have an 03 Sable that died while in reverse. Took it to our usual mechanic and he said the computer was dead. Got us a new one but couldnt find one with a key already coded to it so he called around and found the lowest price for having the current key coded to the new computer. Just spoke to him and he said the dealership he took it to is saying the key is bad and I need a whole new key. My question is, how is this possible if the key would turn off the theft light like it normally did. When inserting the key it wouldnt flash rapidly or anything just stay on and go out after all the other dash lights turned off. Does that sound like a bad key? So now they want $130 for the key and $65 to code it.