Wed, June 10, 2009
Why Not Buy a Chrysler or GM Car Now, While They’re Going Begging?
Here’s the test of whether you're a true contrarian: would you buy a Chrysler today?
Now that the Supreme Court has ruled that the Chrysler-Fiat deal can proceed as planned, the danger of an ugly liquidation of Chrysler’s assets is past. This week’s Barron’s has an interesting article discussing the incredible deals available on new General Motors and Chrysler vehicles as a consequence of their respective bankruptcies. There are new cars being sold for as much as $6,000 less than last-year’s models, and a quarter of the new cars sold have been priced below the dealer’s cost.
Obviously, you have to really want to own one of these cars, but if you’re seriously interested in a Chrysler or GM vehicle, now is your chance to get a great deal. You can go shopping for Chrysler products using the Wall Street Journal’s list of the 789 dealerships that Chrysler wants to drop (they’re probably highly motivated to sell) or you can view dealer inventory in your area using one of several sites: TrueCar, Edmunds,com. CarsDirect.com, Nadaguides.com, or Cars.com.
What are the risks? At this point, the Federal government is pretty earnest in its resolve to keep GM and Chrysler alive. Still, it makes sense to think about the what-ifs.
Resale Value
This is the greatest risk, I think. These manufacturers are likely to be around for at least another five years or so, but the jury’s still out on their long-term viability. If a manufacturer folds, the resale value of your vehicle will probably suffer.
Dealer Service
Personally, I’ve never been a big fan of having cars serviced by dealers, so normally I’d tend to downplay the importance of this risk. But GM and Chrysler warranties for new vehicles require dealer servicing, so this becomes very important. You could really be stuck if there aren’t any dealerships close to you. Population centers are not going to be left without dealer representation, so if you live in a major metropolitan area, there should still be dealers in reasonable proximity to you even after many dealerships close. Otherwise, getting routine servicing done and maintaining your warranty coverage could become a real pain.
Replacement Parts
If a car company goes under, that will likely be the death knell for many of its suppliers. GM is discontinuing Pontiac, but there’s a fair amount of interchangeability between models in different lines, so most parts should remain available. I’d count this as a risk, but a lesser one – somebody will be making replacement parts for most of these vehicles for at least a while, even if a manufacturer folds in the future.
Future Warranty Coverage
The good folks at the U.S. Treasury are guaranteeing the warranties of General Motors and Chrysler vehicles purchased during their restructurings. According to Treasury Department’s statement, “The U.S. Treasury will work with the auto companies to back-stop your warrantee, and will commit to honoring that warrantee in the event that the manufacturer cannot.” You can trust Tim Geithner; It’s not like he’s going to be completing your tax return for you….