Car buyers face uncertainty as GM and Chrysler restructure
Buyers considering GM or Chrysler in 2009 must weigh warranty protection, dealership closures and future resale value as the US giants undergo radical change.
US car buyers in mid-2009 faced a dilemma: heavily discounted vehicles from General Motors and Chrysler came with the risk that the companies, or their dealer networks, might not survive long enough to honour warranties or provide parts and service. Both manufacturers were undergoing government-backed restructurings, with GM in particular planning to close thousands of dealerships by the end of 2010.
Manufacturer versus dealer warranties
The main concern for buyers was warranty coverage. Manufacturer-backed warranties remained valid across the national dealer network, and in the case of GM and Chrysler, the US government guaranteed these warranties for cars purchased by 30 June 2009. This provided some reassurance for those buying before the deadline, and the government indicated the scheme could be extended if needed.
Dealer-backed warranties were another matter. These policies were tied to the selling dealer and could become worthless if that business closed. With GM planning to cut its US dealer network by around 40 percent, dropping from 6,246 outlets in 2008 to 3,605 by the end of 2010, many buyers risked losing their local service point. In such cases, even a manufacturer warranty could mean travelling further for repairs or scheduled maintenance.
Parts supply and servicing concerns
While buyers worried about future access to parts, industry experts suggested that sourcing components for recent GM and Chrysler models should not be a problem. The scale of existing vehicle fleets and the presence of independent parts suppliers meant that spares would likely remain available for years. Insurance cover was also not expected to be affected by the manufacturers’ financial difficulties.
Resale values under pressure
Ongoing uncertainty over GM and Chrysler’s futures led analysts to predict a short-term fall in the resale values of their cars. Trade-in values were also expected to drop, which would be less of a concern for buyers planning to keep their vehicles long-term. The situation varied by brand: Ford, which was not taking bailout funds at the time, was considered more stable than its Detroit rivals.
What buyers should consider
- Opt for manufacturer-backed warranties rather than dealer-specific ones.
- Check the likely availability of service and parts in your area, especially if your local dealer is at risk of closure.
- Expect lower resale and trade-in values for GM and Chrysler vehicles in the near term.
- Buyers comfortable with independent servicing may benefit from discounts, but should weigh the risks.
