There’s a lot of media coverage and concern about the fate of General Motors and Chrysler and about the UAW workers and their families. There’s even concern about car dealers and their employees and families. But what about you, if you are driving a Jeep, a Pontiac, a Dodge truck, a Hummer, a Saturn or any other GM or Chrysler product?
You have to face the fact that your vehicle has plunged in value. This is because the demand for products of these two manufacturers has plunged, especially for those makes that have been discontinued like Saturn or Pontiac. The value has also plunged because tens of thousands of Chrysler and GM vehicles will be dumped on the market by the thousands of dealerships closing and the banks that have seized the inventories of failed and canceled dealerships. It’s also because lenders are afraid to finance GM and Chrysler products. They have drastically raised their credit standards and down payment requirements. This makes it very difficult for most people to buy a GM or Chrysler product, even if they wanted to.
I’ll give you the good news first. If you are lucky enough to be leasing your GM or Chrysler vehicle, you are in the best shape of anybody. This is because you have no liability for the likely plunge in resale value of your vehicle. The resale value of your vehicle is the problem of the leasing company or bank who owns your vehicle. The GM or Chrysler model you are now leasing will be worth many thousands of dollars less than the leasing company thought when you leased it [Unless you leased it very recently which is unlikely because GM and Chrysler virtually eliminated leases when the economic crisis hit]. Actually, you are enjoying the benefits of their mistake one, two, or three years ago. That was when they grossly overestimated the “residual value”, or the estimated value, of your lease vehicle at the end of the lease. But I must warn you that the leasing company will be trying very hard to trick you into buying the car for the inflated value or to have you extend your lease. They do not want to have you turn that vehicle back in because they may lose $10,000 or more when they are forced to sell it the auto auction. Another warning is to be especially careful when you turn your car in to the dealer. Demand a thorough inspection report, detailing the condition of your vehicle’s interior, exterior, and mileage. Be sure you and a representative of the dealership sign off on this report and you keep a copy. Ideally, you should also take photos of the interior and exterior. Leasing companies are charging for “above normal wear and tear” as never before. They are overcharging on virtually all lease turn-ins unless you protest with documentation.
What do you do if you own your GM or Chrysler vehicle? The best solution for you is to keep it for as long as you can. The longer you own any automobile, the lower the average annual depreciation. The largest amount of depreciation for a new automobile is in the first year of ownership. Each year, the amount of deprecation gets less and eventually it almost stops. If you take really good care of your car, getting all factory recommended maintenances and washing and waxing it regularly, you will get good value out of your purchase and will enjoy reliable transportation, even if you won’t sporting the latest model on the block.
But, if you decide you must buy another vehicle, be prepared to get far less for your GM or Chrysler vehicle as a trade-in or selling it yourself. If you do trade it in, be very careful of those dealers who promise high trade-ins or “minimum” trade-ins. These are simply illusions made possible by artificially inflating the price of the new vehicle they are selling to show you an artificial “over allowance” for your trade-in. You’re better off just to “bite the bullet” and sell your trade in for what it’s worth. Just be sure not to sell it or trade it for less than it’s worth. You can do this by getting at least 3 bids on your vehicle. Call three used car managers at 3 dealerships that sell your make. Tell them you want to sell your car [do not mention that you are going to buy another]. Drive to each of these three dealerships and get their bid for your car. Now you’re prepared to buy the car of your choice. If the seller doesn’t match your highest bid, sell it to the highest bidder [Take into account the fact that you lose your sales tax deduction by not having a trade-in if you sell your car outright].
When you decide which make car to buy, you should consider makes with established higher resale values. You can get this information from Consumer Reports or online at www.kbb.com and www.edmunds.com. You don’t want to put yourself right back into the same position you started. Too many people fall for buying a vehicle because the selling price is the lowest or the rebates are the highest. The initial price you pay for car is only one component of the true total cost. In fact, highly discounted cars and cars with big rebates depreciate much faster.
I’ll finish with some more good news. You don’t have to worry about your warranty coverage, servicing for your vehicle, or spare parts availability. The government and existing laws will see to this. You may experience less convenience if your dealer is one of those who will be closing his doors. It would be a good idea to find out which GM and Chrysler dealers will be around in the future. Things are pretty chaotic now, but this news should be made public before much longer. Right now, GM is not revealing the names of the dealerships they have canceled. If you own a make that has been canceled like Pontiac or Saturn, other GM dealers will be able to service and perform warranty work for you.