WASHINGTON — General Motors and Chrysler delivered their plans for survival Tuesday to the White House in order to receive billions of dollars in loans. Here are some answers to questions about how their restructuring could affect what’s in your garage.
Q. Will the warranty on my car or truck be affected? A. The short answer is no. The automakers are obligated to fulfill their end of the contract as long as they remain open for business, said Philip Reed, senior consumer advice editor at .
General Motors has said several times that it will honor all outstanding warranties in the United States and worldwide as it attempts to stay solvent. At Chrysler, a spokesman said Tuesday that the company “stands by its customers.” However, if an automaker did fall into bankruptcy, the fate of consumer warranties would be unclear. Reed said the issue likely would be addressed quickly in that worst-case scenario.
Q: What happens if one of the automakers goes bankrupt? A: To be clear, General Motors and Chrysler are developing survival plans to avoid just that. They maintain that bankruptcy would destroy consumer confidence in their brands, decimating sales. And even if it were to occur, how it would be structured remains to be seen.
One thing, however, is certain: You must keep paying your car note no matter what. In the event of bankruptcy, a third party, possibly the government, would take over the company’s debt and seek payment.
You would still need to write the check; the name you’d write on it could change.
Q: Will my car’s brand be sold? A: As the automakers hunt for ways to save cash, they will be targeting brands with poor performance. GM has said its Swedish-based Saab line has been struggling for the last two decades and has put it up for sale along with its tank-inspired Hummer. Ford is trying to shed its luxury Volvo division, the last of its foreign brands.
No buyers have stepped forward publicly for any of the lines. But if they do, one of the biggest questions for customers likely will be whether they will make changes to service plans or warranties. But that’s impossible to answer until a deal has been done.
Q: How hard is it to get a car loan right now? A: Qualifying for an auto loan is more difficult than it was a few years ago, although some of the more stringent restrictions have been loosened. General Motor’s financial arm, GMAC, has lowered its minimum credit score requirement to 621 after raising it to a conservative 700 last year.
In addition, auto loan interest rates have fallen slightly over the last year, . senior financial analyst Greg McBride said. He said the average interest rate on a five-year loan was 6.9 percent, down from 7.3 percent last year but unlikely to make much difference in a buyer’s monthly payment. Many lenders also are requiring at least a 10 percent down payment to qualify.
Q: So is it a good time to buy? A: The answer depends on your financial situation.
For those with stable jobs and good credit, there are plenty of deals to be had. According to an analysis by ., prices on 2008 models were swinging wildly in December, varying more than twice as much as in they did in July, a sign that dealers were desperate to make deals.
In addition, the economic stimulus bill signed by President Obama Tuesday allows consumers to deduct state and local taxes paid on new cars priced up to $49,500 through the end of the year.
However, as the unemployment rate continues to rise, many consumers may be hesitant to take on such a large purchase. And if you are worried about making the payments, don’t be swayed by the promotions.
“That person is not going to feel comfortable right now no matter how good the deals are,” McBride said.
