General Motor’s decision to file for Chapter 11 bankruptcy has created a lot of uncertainty for both car buyers and owners of GM vehicles. While it’s too early to know how all of the variables will play out, both the company and the federal government are hoping for a relatively short restructuring period. Ideally, GM will emerge from this as a leaner, more streamlined automaker—with fewer brands, dealerships, and models—that is better positioned to compete in today’s automotive environment.
In the meantime, the restructuring processes could be fairly transparent for most car buyers and owners. Exceptions include those who have a local dealership close its doors or discontinue carrying a certain brand. And for car shoppers in general, it could be a great time to buy.
This Q&A provides some guidance to some of the common questions we’re hearing. For more information, go to our Auto Crisis page.
Will I be able to get parts and service for my GM car?
GM has said that it will continue to support their authorized dealerships with parts during this restructuring period, so that the dealers can continue to service your vehicle. Of course, common third-party replacement parts are also widely available through auto-parts stores.
Keep in mind that you don't have to take your car to a dealership for servicing, even if it’s under warranty. A good independent shop, especially one that specializes in your car’s brand, should be able to handle routine maintenance and many repairs. Moreover, independent repair shops are often less expensive than dealerships and, according to our Annual Auto Survey, generally provide a higher level of satisfaction. You will need to go to a dealership, however, for warranty and recall work.
Will GM still back my warranty?
GM has said that it will continue to support its vehicles’ warranties during this restructuring period. In addition, the Treasury Department’s Warranty Commitment Program says that the federal government would back warranties for any GM vehicle bought during the restructuring period, should the automaker go out of business. The government would contract with a third-party auto-service provider to provide warranty repairs. Such a program might not run as smoothly as an automaker program, but it wouldn’t kick in unless the automaker is liquidated.
Will this affect the resale value of my GM car?
With the uncertainty surrounding GM, it’s likely that its cars will drop in value during this restructuring period, especially for brands that are being phased out or sold. But if the company re-establishes itself as a strong, stable automaker in future months, ongoing models could see a rebound in value.
The resale value for brands that are discontinued is likely to drop dramatically, as happened when GM phased out Oldsmobile in 2004 and Chrysler dropped Plymouth in 2001. This would have the most effect on owners who keep their vehicle for only a few years, say five or less. But if you plan to keep the car for a long time, depreciation is less of a factor.
To help compensate for this drop in value, GM is currently offering a sales-incentive program that gives you extra money if you trade in a current GM car for another. It also covers selling your car privately, but you still need to buy another GM vehicle within a certain period of time. For details, go to www.gm.com/vehicles/currentoffers/.
To estimate how much your current vehicle is worth and to get the most for your car when selling or trading in, see our used car buying advice.
Should I buy a GM car now?
GM is offering some tempting sales incentives, including zero-percent financing and/or cash rebates, on many of its models, including ones that we recommend. And with slow auto sales and too much inventory, dealers are ready to negotiate. So, it’s likely that you could get a very good deal during this restructuring period.
In addition to advertised customer incentives, automakers often provide behind-the-scenes dealer incentives. Knowing about these can help you to negotiate a lower price. Consumer Reports’ New Car Price Reports give you a list of all national and regional incentives for a particular model, including the hard-to-find holdback amounts, and the CR Bottom Line Price, which factors in all those to give you a good starting point for negotiating the vehicle’s price. Dealer sales incentives can also be found at various auto-pricing Web sites.
It’s important to remember that any deal is only as good as the vehicle you’re buying. We recommend that you thoroughly research the performance, reliability, safety, owner cost, and owner satisfaction of any model you’re considering. Subscribers to ConsumerReports.org have access to our Ratings in all of those areas.
Several recent GM models have done well in our testing and are very competitive in their classes. This includes the Chevrolet Malibu, Cadillac CTS, and GM’s quartet of three-row, crossover SUVs (Buick Enclave, Chevrolet Traverse, GMC Acadia, and Saturn Outlook). All except for the Malibu, however, have shown below-average reliability in their first years.
Overall, you need to balance a good deal with the risk of greater depreciation, the chance of reduced consumer protections (see What If I Have a Claim Against GM?), and the chance that your local dealership could go out of business in coming months. (GM recently notified hundreds of its dealers that it will not renew their franchise contracts in October 2010. In the end, the company expects to have about 3,600 dealerships in the U.S., still well more than Toyota’s 1,600 or Honda’s or Nissan’s 1,200.)
What brands and models will still be available?
GM plans to trim its number of U.S. brands from eight to four. It plans to retain Buick, Cadillac, Chevrolet, and GMC, while phasing out or selling Hummer, Pontiac, Saab, and Saturn. GM has said that it will not rebrand any vehicles from those divisions to be sold by the remaining divisions.
Pontiac is expected to be phased out by the end of 2010. GM has been meeting with parties interested in buying Hummer, Saab, and Saturn. But since no final details have been announced, the future of those models remains uncertain.
GM has also said that it will discontinue several of its high-performance models by the end of this year, including the Chevrolet Cobalt SS sedan, HHR SS, and Impala SS, the Cadillac STS-V, and the Pontiac G6 GXP.
What if I have a claim against GM?
It’s too early to tell what will happen, but in the case of Chrysler’s restructuring consumer litigation and many unsettled claims have been frozen by the bankruptcy process. Even the checks for some settled lemon-law claims have bounced, although Chrysler has said they will be reissued.
To get answers to the most common questions and concerns about Chrysler’s and GM’s bankruptcy, check out our Auto Crisis hub.