Blog
May 27th, 2009

Is It Safe to Buy A GM or Chrysler Vehicle?

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I was talking with my friend Adam this weekend when he told me he was thinking about buying a new Pontiac. Despite my misgivings, he seemed to have his heart set on a particular model. I told him about GM’s plans to “orphan” the Pontiac brand along with Hummer, Saab, and Saturn; but even that didn’t seem to change his mind.

Is it safe to buy a GM or Chrysler vehicle despite their pending and/or ongoing bankruptcy proceedings? James Henry of CBS.com’s Money Watch says if you can put up with a few inconveniences, the general answer is “yes.”

As a potential car buyer, no matter the brand or model, there are several factors to consider when shopping around: warranty, resale value, maintenance, and incentives. These factors become especially magnified when you’re considering buying a brand that may go out of business.

What Will Happen to My Warranty?

To ensure consumer confidence and promote car buying throughout bankruptcy, the Treasury has already announced that the Federal government will back all GM and Chrysler warranties issued during their restructuring period. Our guess is that even if these companies emerge from bankruptcy and subsequently re-fail, Washington will continue to back the warranties. You would think the government would stand behind the taxpayers that ponied up the billions to bail out these companies in the first place — but hey, you never know.

What Will Happen to the Resale Value?

Where GM or Chrysler buyers may stand to lose the most is in resale value. As we noted in our previous post on housing, supply and demand mainly dictates your future trade-in value. As a guard against their vehicles’ trade-in value, GM has introduced their Vehicle Value Protection Program. But if Americans continue to move away from domestic vehicles, the potential trade-in value may shrink down the road.

Dealerships Will Be Few and Far Between

Two weeks ago GM and Chrysler announced the combined closings of nearly 2,000 dealerships. Customers will have to travel farther to find a dealership, which could be especially frustrating for new-car owners whose vehicle warranties require that repairs be done exclusively at GM or Chrysler dealerships.

Can I Still Buy Car Parts?

Experts say car parts used in the brands like Pontiac that are doomed for extinction should continue to be available, since GM uses many of the same types of parts for several different vehicles. If parts do prove hard to find, you can bet prices will rise.

Incentives

Time is running out to take advantage of dealer incentives. GM’s Vehicle Value Protection Program expires June 1. If you’re still set on buying a GM or Chrysler vehicle, it shouldn’t cause you too many immediate problems beyond inconvenience. For those of you, like Adam, considering buying a brand like Pontiac, you should be fine for the time being, but there’s no certainty in what the future holds in terms of part availability.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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