ASK KIM


Grab a Deal on a GM Vehicle?

Kimberly Lankford

Since General Motors filed for Chapter 11 bankruptcy on June 1, is this a good time or bad time to buy a GM car?



Since General Motors filed for Chapter 11 bankruptcy on June 1, I’m wondering – is this a particularly good time or bad time to buy a GM car?

This could be a very good time to buy a GM vehicle. General Motors is continuing to do business during the restructuring and hopes to emerge as a stronger – and leaner – GM in late summer or early fall. Meanwhile, new-car buyers can get some great deals.

Expect to find the best bargains through the fall at dealerships that are closing, says Jesse Toprak, an analyst at Edmunds.com, where readers can find a list of closing GM dealers. announced in late April that it planned to reduce the number of dealers from 6,246 to 3,605 by the end of 2010. That schedule is being accelerated because of the bankruptcy filing.

The deals may get better as the closing dates get closer, but you will also have fewer choices if you’re looking for a particular color or certain options. “We anticipate prices to start rising by the time we hit late fall and winter because the fire sales will be all gone,” says Toprak.

Advertisement

Toprak recommends that you target a fair price – and know what incentives are available – before you visit a dealer (note that carmakers often announce new incentives at the beginning of the month). There’s currently a larger-than-normal price difference from dealer to dealer – and prices can vary by thousands of dollars even at the same dealer. “If you go into a dealership and they say that they’re offering $5,000 off the dealer invoice, that might sound good. But in some cases the real price should be $8,000 off,” Toprak says.

General Motors hopes to keep core brands, such as Buick, Cadillac, Chevrolet and GMC, and shed less-profitable brands, such as Hummer, Saab and Saturn. The company has already announced that it will stop producing Pontiac cars in the next few months and that Chinese heavy-equipment maker Sichuan Tengzhong Heavy Industrial Machinery Co. plans to buy Hummer.

That means the resale value will vary a lot depending on the brand you buy. Toprak expects Pontiac and Saturn to experience the biggest drop in resale values. He says that the cars remaining in the GM lineup will take a resale hit over the short term but that you won’t see a big drop over five years.

General Motors will continue to honor its warranties, a request it made to the bankruptcy court. And the U.S. Treasury Department has offered to back warranties for any GM vehicles bought during the restructuring period. That means that if the company doesn’t ultimately emerge from bankruptcy, the government will pay for service on those cars.

Availability of service shouldn’t be an issue for now. Remaining GM dealers will service all GM vehicles – including Pontiac and other brands that may cease production. Parts for all makes should remain available for a while. “There are a lot of these cars on the road, and suppliers will continue to make the parts,” says Patrick Olsen, editor in chief of Cars.com. “But over the years, the availability will decline as the number of these cars on the road declines.”

If your local dealer closes, you may need to travel a lot farther for warranty service. Olsen expects some former GM dealers to stay open as independent dealers who may continue to service vehicles, but you should find out whether they’re certified to do warranty work.

For more information about the impact of GM’s bankruptcy, see What General Motors’ Bankruptcy Means to Consumers and What General Motors’ Bankruptcy Means to Investors.

Got a question? Ask Kim at askkim@kiplinger.com.




You can get valuable updates like Ask Kim from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger