Some say there’s never been a better time to buy a car. With sales down nationwide and dealers eager to move cars off their lots, there are definitely bargains to be had. But with American auto manufacturers like General Motors and Chrysler in a financial free-for-all, it’s easy to wonder: just how smart is it to buy a car from a company that might not be around when your odometer hits 3,000?
There are several things to consider before purchasing a car from GM or Chrysler, chief among them being parts and services. Say, five years down the road, your car needs an overhaul. Will parts still be available? And if your local dealership closes, what happens to that 5-year warranty?
When it comes to parts, experts say there’s little cause for concern. And finding an auto insurance (URL: http://www.netquote.com/auto-insurance/) policy for your car won’t be a problem. Service, however, is another story, especially if you’ve purchased a dealership-backed warranty that’s tied to the specific shop that sold you the car. In the event that the dealership closes its doors, you’ll be out of luck.
If you do decide to purchase a warranty, make sure it’s manufacturer-backed. Dealerships nationwide will honor this type of warranty. In the case of GM and Chrysler, the federal government is backing all manufacturer warranties on new vehicles purchased by June 30, a deadline that’s expected to be extended. In the event that your car’s brand goes under, manufacturer-backed warranties are honored by the parent company’s sister brands.
Keep in mind, however, that if your local dealership goes out of business, you could be forced to travel some distance to have your car serviced. GM, for instance, has announced plans to trim its dealerships from 6,246 in 2008 to 3,605 by the end of 2010 – a drop of 40 percent.
According to CBS Money Watch, there will likely be a short-term drop in resale value as a result of questions regarding the financial health of the American manufacturers. This will also translate into a lower trade-in value, which may be less of a concern for those who plan on keeping their cars for longer periods.
It’s also important to remember that not all car company bailouts are created equal. According to MSN Money columnist Liz Pulliam Weston, GM is considered more likely to recover as a company than Chrysler.
“Chrysler is widely regarded as the weakest of the big U.S. carmakers and seen as unlikely to survive,” Weston writes. “General Motors is on the ropes and will probably emerge as a much smaller company. Ford Motor is considered in the best shape, is currently not taking any bailout money, and has enough cash to operate for now.”
So if you’re the type of driver who prefers to have a warranty and depend upon your dealership for service, buying from GM or Chrysler might not be the best option. But if you prefer independent mechanics and aren’t risk averse, now’s a good time to get a deal.