By IVAN PENN
St. Petersburg Times
We see bankruptcy. We think: fire sale. And why not? Consumers have been trained that way forever. As companies prepare to shut their doors, the banners go up.
"Everything must go! Up to 70 percent off!" And we rush in and buy Blue Ray this and "i" that. Stock up for Christmas with video games. Buy the extra suit, shoes or top we'll never wear.
But when it comes to cars and the now-bankrupt GM and Chrysler companies, understand, you're not dealing with the same kind of animal. "There's a perception on the part of a lot of consumers that this should be similar to what happened with Circuit City ... slashing and slashing," said Phil Reed, senior consumer advice editor for Edmunds.com. "We're not seeing that."
First of all, the bad economy reduced all car prices, so it's a good time to shop for a car -- not just GMs or Chryslers -- as long as you're in the market for one.
"I think consumers will find that cars have been so deeply discounted in recent months they can't go much lower," said Jeff Bartlett, deputy online automotive editor for Consumer Reports. "The dealers aren't going to give the cars away."
So don't get swayed by any marketing hype. No one is going to just hand you the keys.
The GM bankruptcy creates some serious issues to consider when purchasing cars, rather than just opening more opportunity to make a purchase. One of the most significant is GM's plan to phase out its Pontiac brand while selling the Saturn and Hummer brands.
Perhaps you find a deal on a Pontiac, because the brand will spend its future nights at the museum. There are questions you need to ask: Will I be able to find parts? What about the auto warranty and servicing? What will the resale value look like?
GM says parts, warranty and servicing won't be a problem. "First and foremost, warranties are valid," said Steve Janisse, a spokesman for GM. "Those will be backed by the government." "Replacement parts and all of that sort of thing, GM will have them now and well into the future," Janisse said.
For Chrysler, the tale is different as it is on its way out of bankruptcy, and none of its brands face termination.
But Chrysler is planning not to renew contracts with some dealers that sell competing brands or mostly move used cars. So the number of places offering Chrysler, Jeep and Dodge service will decrease, though the company promises a warranty repair dealership within 10 miles of your home.
"Consumers can take in any Chrysler, Jeep or Dodge vehicle," said Kathy Graham, a spokeswoman for Chrysler.
Reed at Edmunds.com suggests the risks, while real, are negligible in comparison to deals that people will find. "There are going to be disruptions," Reed said. "The biggest possibility of that is in convenience and comfort" related to access to dealerships.
Bartlett has a warning, however: If the value of the cars is low now, what can you expect in five years for a Pontiac G8 that gives a fraction of the fuel efficiency of newer cars?
"There are certain risks in buying one of those cars," Bartlett said about Pontiac and other brands with uncertain futures. "It's not known what challenges you will have five years from now. Chasing the deal today is where people find themselves disappointed."
Bartlett said the most important thing is finding good cars. Chrysler brands fell short, he said.
"No Chrysler, Jeep or Dodge meets requirements (of Consumer Reports) to be recommended," Bartlett said.
So here's what you should know before you go out to shop:
Do your homework. Before you go out to the dealership, Bartlett recommends researching the cars you are looking at.
Don't let the deal drive the choice. "Focus on the good cars that meet your needs," Bartlett said. Despite the deal, if there are issues now, "you bet five years from now the concerns are only going to be greater," he said.
Tips on purchasing a car at a fire sale:
Know if the dealership is closing. If so, the urgency to sell is high and the discounts will be deep.
Think lower. In some cases, closing dealerships will have advertised specials and pricing online. And you will probably be able to negotiate an even lower price.
When to make your first offer: After getting the dealership's "best price," an opening offer can be made to the salesperson. This offer shouldn't be so low that it alienates the staff. You need to be in the ballpark but on the lowest end of the spectrum. The dealership will counter offer and the negotiations will go back and forth until you reach an agreement.
