As Car Brands And Dealerships Vanish, Shoppers Face Choices

Janice Podsada

May 17, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Whether it's a new Pontiac G6 sedan, Saturn Outlook or a Hummer H3, it's no secret that there are good deals on car makes and models facing the chopping block.

GM, which is discontinuing its Pontiac and Hummer brands and is seeking buyers for its Saturn and Saab divisions, is offering low-interest-rate financing on many models for up to six years, said Kevin Sullivan, owner of Northwest Hills Chevrolet Pontiac in Torrington.

"There are some situations where you can stack some cash incentives on that. It's a great time to buy anything," said Sullivan, whose dealerships carry GM, Chrysler and Jeep brands.

But before you rush to the auto showroom, beware of the downside to purchasing a vehicle that's being phased out. Buying a discontinued car, or a car from a dealer going out of business, has its pros and cons, so do your homework before you make a decision, experts say.

Most new cars lose value the minute they're driven off the lot, but with a discontinued brand, its typically a more severe drop, state Attorney General Richard Blumenthal said.

"We've gotten calls from people who are concerned about discontinued cars. We are not advising people what cars to buy -- but people should be aware of the decrease in resale value for these products," Blumenthal said.

On the plus side, there are federal laws that protect the warranty. "As long as the company still exists -- even if it discontinues a certain product line -- these warranties are good. GM pulled the Pontiac brand, but it is still responsible for the warranty on Pontiacs," Blumenthal said.

Departing Dealers

The chances for buying cars from dealers that will fade from the scene are many. Chrysler, which has merged with Italian auto maker Fiat, is in Chapter 11 bankruptcy reorganization. The privately owned company is eliminating 789 of its 3,200 dealerships, and GM plans to revoke as many as 2,600 of its 6,000 franchises by the end of 2010 -- starting with 1,100 it announced on Friday.

Jim Fleming, president of Connecticut Automotive Retailers Association, said Friday that the Chrysler dealerships in the state whose franchises have been revoked, except for Holley Chrysler Dodge Jeep of Middletown, which closed last month, "are open right now and can sell cars until the bankruptcy court rules in June."

One issue that can crop up is the lack of service records. It's not safe to assume maintenance records will be moved safely to a surviving dealership, and without the records, some warranties can be invalidated. Car owners who don't have solid records should make copies before a dealership closes.

Although manufacturer warranties are protected, extended service agreements, typically covering work after a manufacturer warranty expires, can be more complicated. If a third party backed the contracts, rather than the manufacturer, the owner may have to check the contract to learn where to go for repairs.

Some buyers cut special deals with a dealership, giving them freebies such as oil changes for the life of the car. Other dealers don't have to honor those deals, but they might do so anyway to get your business.

Extra Depreciation

If you're buying a vehicle from an automaker that's phasing out a particular brand or going through bankruptcy, there are extra risks, said Jeff Bartlett, deputy online editor for autos at Consumer Reports.

"With GM it's hard to say what's going to happen -- things could be great, things could be bad," Bartlett said.

Although the dealer may be offering deep discounts on some discontinued models, it may not be enough to offset the probability of greater depreciation. "I don't know if the savings are worth it," Bartlett said. "I don't know if a $500 savings would be enough to sway me."

Bartlett's advice could be taken with a grain of road salt: Consumer Reports does not recommend any vehicles in the Pontiac, Saab or Saturn lines. For Jack Nerad, executive market analyst with Kelley Blue Book, the drawbacks of buying a discontinued auto brand are minor. With factories shut down, ordering a custom car package that's not on the lot might take longer if a dealer can't find one.

And if you're a gambler, so to speak, with cash to spare, a discontinued car -- if you pick the right one -- could become a prized item.

"I've been following the collector car market for a long time," Nerad said. "The cars that don't sell well very often become the collectors' prizes. I would look at a current Saturn Sky, Pontiac Solstice, a Hummer H3 or a Hummer pickup

Distant Parts

A concern consumers should definitely mull over is the availability of parts and service.

Many GM autos share "platforms and power trains, making it easier to have one serviced at another branded GM dealer," Bartlett said. Butwith so many dealerships shutting down, in some areas the nearest one might end up being many miles away, making it harder to find parts and increasing the time it takes to get a car serviced.

So far, Earl Bancroft, owner of Riley and Scranton Service Center Inc. in Glastonbury, an independent repair shop, said he hasn't found it any more difficult to get parts for a discontinued brand than for an existing one.

"Case in point: When GM closed their Oldsmobile division a few years ago, we didn't immediately find accessing parts or repair information to be a problem. I don't see that as a major impediment," said Bancroft, who has been in the car repair industry since 1976. "The shared parts are still being produced. Pontiac is just a division of GM."

What independent repair shops have experienced in recent months, however, is some slowdown in getting parts through the dealer network. As local dealers fold, "some parts are now two or three days away vs. one day away," Bancroft said.

Don't Be Greedy

Dealer closures and bankruptcies have made potential car buyers shaky, said Nerad, at Kelley Blue Book. "A lot of people are in pause mode. People that were going to buy are waiting to see what happens."

But Nerad added, "There's no reason to hesitate about a buying from a car company in bankruptcy or leaning in that direction."

"GM and Chrysler make some great vehicles. I wouldn't hesitate to buy at this time. In fact, the incentives are incredible -- there are thousands of dollars in factory cash rebates, discounts off the suggested retail price and lease deals that are compelling."

But don't get too greedy, or you'll be disappointed. "You're not going to get the $50,000 SUV for $20,000. However, it's reasonable to expect $5,000 to $10,000 off the manufacturer's suggested retail price," Nerad said.

Pontiac will be phased out by the end of the year, but there's still momentum in the discontinued brand. The brand has announced its intention to build 2010 models with a start-up production in September, said Sullivan, who sold the one Pontiac Solstice that was on his lot last week.

Can't live without a 2009 Solstice GXP in metallic ruby red? "I could get one from another dealer," Sullivan said. "I can locate a Solstice to your specifications. And Pontiac is still building cars, so you can order a custom package."

Newstex ID: 35000168