How the GM Bankruptcy Affects You

If you own a Chrysler or GM car, you may be wondering how the GM bankruptcy and Chrysler collapse affect you. Rest easy – your car is still covered by the warranty. If you’re in the market for a car, you’re probably seeing great deals on the American brands. The question is how comfortable you feel buying one. Here’s what you need to know.

Warranties during Chrysler and GM Bankruptcies
The GM bankruptcy is actually fairly straightforward from a consumer perspective. The company isn’t going to cease to exist, although some brands and dealerships are being shuttered. The government has a funded program in place for both GM and Chrysler to guarantee your coverage for the term of your warranty. Federal law requires that your parts continue to be manufactured, so you won’t be unable to get the parts you need. You also don’t need to contact the government to file a claim. The dealership will take care of it.

Loan Payments during the Bankruptcy
If your bank went bankrupt or sold your home loan, you still have to pay the mortgage. The same holds true of any payments you owe on your car. Continue sending payments on time to the same address until you receive a notice indicating a new address for your payments.

Buying a Car from a Bankrupt Manufacturer
This is a little more tricky. If you’re in the market for a car, you may be able to find some great deals on Chryslers and GMs. The question comes down to whether or not you’re comfortable buying a car from a company in bankruptcy or have faith in its current models.

GM is expected to continue to exist after they emerge from bankruptcy. So, the question is not whether you’ll still be able to get parts and warrant coverage. It’s a question of whether or not you believe in GM quality.

I imagine GM to be in the same situation as United or Delta airlines when they were in bankruptcy. People didn’t stop flying those airlines while they were in Chapter 11. You shouldn’t avoid GM just because it’s in bankruptcy. Consult expert reviews, quality ratings, fuel ratings, maintenance ratings, etc. just as you would for any other car purchase if you have a GM car on your list. You may want to consider that GMs may have a lower resale value after they emerge from bankruptcy, but the resale wasn’t all that great to begin with and is not a huge factor if you own a car for ten years, as I recommend.

Chrysler is the sticky wicket. Although it will soon re-emerge as a partnership between Fiat and the Chrysler arm of the UAW, only time will tell how Fiat will manage its new brand. Chrysler’s current line of cars is not well-reviewed or considered to be very reliable. Fiat hasn’t been in the US market for some time, but European cars do tend to be smaller and more nimble. If I had a choice, I would wait to see the new designs they come up with for Chrysler before opting for one of these cars.

Ford Is Fine
For anyone concerned about Ford, they are not bankrupt. They have not received bail-out funds. They’re suffering from the downturn, but they’re not currently at risk.

Would I Buy a GM?
Because of my GM bail-out stabby post, some people think I hate GM. I honestly don’t. I don’t hate Chrysler or Ford, either. I think they’re all lumbering companies with outdated business models that need to seriously change if they want to succeed in the future. I also think they have serious reputation issues due to decades of poor manufacturing.

I have actually owned a GM. My first car was an early-90s Pontiac that I later learned was made by Daewoo, which was new to car manufacturing at the time. I’m lucky to be alive after owning that car. Due to the design, it regularly overheated in traffic. When it overheated, the brakes failed to work properly. So picture me sitting in Thanksgiving traffic on a hilly freeway with a car rapidly rising in temperature and my brakes getting softer by the minute. I was lucky to be able to get off the freeway and coast to a stop to wait for my car to cool off so I could get home. The car was replaced one month later by my Toyota. I will never buy another GM. I won’t buy a Daewoo, either.

A car is a personal purchase. Some people feel the need to buy American, and that’s fine. I only ask that you do all your research before you decide which car to buy and don’t let the GM bankruptcy play into your decision if you believe they make good cars. If you have more questions, see the New York Times piece on the bankruptcy.

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