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Mortgage & Housing Market News from HSH.com
November 1st, 2009

Update2: GM Extends 60-Day Guarantee



UPDATE2: Excited by their program’s success, GM has decided to extend their money-back guarantee for all new GM, Chevy, Cadillac, and Buick models. Slated to end at the end of next month, the new expiration date for the 60-day return policy is now January 4, 2010.

From the Consumerist:

If you’re interested in the deal, here’s how it works: You get 60-days to evaluate the car. If you don’t like it, you can return it and get the purchase price and the sales tax back. You have to keep the car for at least 30 days, and if you do more than $200 worth of damage to it — or put more than 4,000 miles on it — you no longer qualify.

There are a few more limitations and whatnot — and in all it’s pretty clear that returning a car is a hassle. You’ll be stuck with the fees from licensing, titling or registration, insurance, dealer installed accessories, aftermarket products or add-on equipment (other than factory options ordered with the vehicle), dealer fees, ancillary products including extended warranties or service contracts, finance charges, etc, etc.

If you’ve been tuning into this year’s World Series you’re no stranger to the numerous Chevy ads, featuring Howie Long, that have hit the airwaves (seemingly one after the other). GM ads will soon hit print as well as social-networking sites like Twitter and Facebook.

Jay Spenchian, GM’s executive director of the marketing strategy support group, is of the opinion that GM’s new media campaign is changing consumers’ view of GM’s vehicle line. Do you agree?

UPDATE1 (published on 10/15/09): Since GM launched their “daring” media campaign about one month ago, the offer that customers could return their vehicle after 60 days for a money-back guarantee, didn’t seem to propel many consumers onto GM’s lots (as we speculated).

According to Autonews.com, just one customer returned their vehicle — opting for an automatic transmission over the manual trans that was purchased:

GM has sold about 150,000 vehicles since the program began. Of that, just over 100 customers have opted to take a 60-day money-back guarantee, [GM Vice Chairman Bob] Lutz said. The rest turned down that option and instead took a $500 cash incentive.

That means less than a tenth of one percent of GM’s customers took advantage of this incentive over the last month (100 out of 150,000 customers).

Will the “aggressive spending” attached to GM’s new media blitz improve GM’s reputation in the eyes of consumers?

We asked it once, we’ll ask it again, “What good is a 60-day money-back guarantee?”

Original Post (published 9/11/09): In the early 1980s, Chrysler head Lee Iacocca told Americans, “If you can find a better car, buy it.” General Motors is taking a page out of Chrysler’s playbook and will soon launch their own daring media campaign: they’ll challenge car buyers to find the best product the market has to offer.

“May the best car win” will be the basis of GM’s campaign which will launch on September 14 and run through November, according to AutomotiveNews.com. The domestic automaker — mere months off a 39-day bankruptcy — will offer customers a 60-day money back guarantee on their new slimmed-down line of vehicles. But there’s more:

In conjunction with its stepped-up marketing effort, GM will cut the U.S. dealer discount made on new vehicle sales by half a percentage point, Reuters reported, citing sources who asked not to be named because the plans are not yet public.

The dealer discount is the difference between the wholesale price and the sticker price, expressed as a percentage of the sticker price.

High Risk, High Reward?

We characterize GM’s new marketing ploy as “daring” because the move poses a significant financial liability to the fragile automaker. The campaign is expected to add “ten of millions of dollars” to GM’s marketing costs. However, the added costs may be necessary to a company that has lost over 30% of its market share over the last four decades. At one time, GM products made up just over 50% of the vehicles on the road; they fell to their lowest share ever — just 19.5% — earlier this year.

GM officials claim that the boost that this program will provide to their sales volume will compensate for the costly strategy, especially since, according to GM’s North American sales chief, Mark LaNeve, there are now fewer GM dealerships.

How the Program Works

The LA Times offers a concise breakdown of how the money-back guarantee will work, and which vehicles it will cover:

*Cars must be a new 2009 or 2010 Chevrolet, Buick, Cadillac or GMC purchased between Sept. 14 and Nov. 30.

* Vehicles can be returned between 31 and 60 days after purchase, and cannot have been driven more than 4,000 miles.

* To qualify, owners must be current on financing payments.

* Buyers who return cars will be repaid the purchase price, excluding dealer-installed accessories such as undercoating.

* If a buyer trades in a car worth less than the amount owed on it, that difference — which dealers often cover — will be deducted from the refund. This occurs, for example, when a buyer trades in a car worth $5,000, yet owes $7,000 on its loan.

Is 60 Days Enough?

What can you tell about a car in the first 60 days that you couldn’t have figured out during the test drive or by just kicking the tires? Perhaps GM would entice more customers if they offered a free extended warranty instead of a 60-day guarantee. To us, this is another passive attempt by an American automaker at drumming up business. If you’re a consistent reader of this blog you have already seen the top-10 cars Americans bought under Cash for Clunkers. If a no-questions-asked $4,500 doesn’t get consumers interested in GM vehicles, we don’t think a 60-day return policy will either.

Agree, disagree? Share your opinions by leaving us a comment.

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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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