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REPORT: Only one buyer has returned a GM vehicle under new 60-day guarantee; transaction prices up $8k
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When General Motors announced its 60-day money back guarantee, we were a bit surprised. The marketing scheme seemed like a pretty big gamble for the fresh out of bankruptcy automaker, but it would seem that the program isn't as risky as it first appeared. According to Automotive News, Bob Lutz, GM's Vice Chairman of marketing and communications, told members of the media yesterday that only 100 of the 150,000 buyers have opted for the program, and of the customers eligible, only one customer has returned his vehicle. Interestingly, Lutz reportedly said that the customer in question had purchased a Chevrolet Corvette equipped with a manual gearbox. What was wrong with it? Well, laziness, apparently, as the buyer returned it 30 days later in exchange for an automatic-equipped car. That may be a crime in the Court of Autoblog, but given that rowing wasn't his thing, we're sure said buyer was thrilled to have the option to switch.
So why aren't customers getting in on the 60 day offer? Because the General is giving them the chance of either participating in the 60 day offer or instead opting for a $500 rebate. And since the 60 Day Guarantee offer began one month ago, those 100 participants have another month to change their minds. Even if all 100 eventually decide to return their Chevy, GMC, Buick or Cadillac, we're thinking that's actually a pretty low number. The money back guarantee program runs through the end of November.
During that same media event, Lutz also took time to brag about GM's dramatically improved transaction prices, as the bombastic vice chairman pointed to new J.D. Power data that reportedly shows that average purchase of a GM vehicle jumped to $35,069 – up $8,000 from September of last year. The massive jump in transaction prices also outpaces by a sizable margin the industry at large, as AN quotes the industry average at $30,327. While the car market's average purchase price as a whole is still up $3,613, we're flat-out stunned that GM was able to raise its transaction prices by $8,000. We'd do the math ourselves, but we have no idea how.
[Source: Automotive News - subs req'd]
Reader Comments (Page 1 of 3)
geo.stewart 9:44AM (10/15/2009)
that would include finance charges, is my guess.
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Rick C. 10:16AM (10/15/2009)
Average final transaction price up $8K? Are they nuts? These are not the times to pull these kind of moves on the few customers you have left.
Epyx 10:19AM (10/15/2009)
Rick,
It means the cars are selling for MSRP or a little less, or it means more options are being ticked, it probably points to less incentives and more desirability.
It seems you think must only mean MSRP price increases, which it clearly does not.
Gary 11:11AM (10/15/2009)
GM is using the strategy that other car companies are using: make the car more "wow" than "meh" by attractive exterior styling and more-than-just-competitive interiors. It doesn't cost much to upgrade the interior materials a notch, but you can charge an extra grand or so for this extra perceived built quality.
The strategy has worked for Volkswagen, and more recently Ford, so why not?
Dave 11:49AM (10/15/2009)
The Cobalts and Aveos sold out during C4C and now theyre selling a ton of real cars.
Matt 2:06PM (10/15/2009)
I owned a Cobalt - it's not a horrible car. The coupe is fairly attractive, it's a peppy car with quite a bit of power/torque for it's class/price and isn't as boring (or ultra tiny) as a Corolla.
Sure it has a hard plastic interior, but last I checked so did the Corolla, Civic, Focus, Forte, etc.
seville484 9:45AM (10/15/2009)
Unless that one person returning their car was my aunt, their claim that only one person has returned their car is not accurate.
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Rich 10:44AM (10/15/2009)
Under the terms of the new 60-day guarantee? Before the news was released?
nrb 11:40AM (10/15/2009)
Correct me if I'm wrong, but didn't you have to keep the car for at least 30 days? If GM waits 30 days and one second to publish this press release, they've timed it so they can claim only one person returned a vehicle.
Marketing BS.
Tourian 9:49AM (10/15/2009)
Our dealer hasn't even had a customer NOT take the $500. Confidence in GM products, despite what you may have heard, is still strong amongst buyers.
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Nightcrawler 2:04PM (10/15/2009)
I wouldn't say it exactly that way. I'd say, that since they were actually confident enough and liked the car enough to be buying a GM, they thought they'd want to keep it. If they didn't have confidence in GM, would they be buying a GM car? No, of course not.
Therefore, given the fact that they were buying a car that they liked and had at least reasonable confidence in, taking the $500 over the chance to return a car that you, at that time, are thinking you really like is a no brainer.
Tourian 9:49AM (10/17/2009)
Which is why I said, amongst buyers. People on the fence about an import might still choose a GM product first but take the buy back option if they get enough buyers remorse from their peers who think imports are God's gift and American cars are terrible. There's plenty of that sentiment going around.
Todd 9:52AM (10/15/2009)
Increase in transaction price tells me that GM is just catering to niche market's ( corvette, V-spec Cadillac, etc. ) and failing to make any ground on the market/demographics lost to Honda and Toyota.
A handful of sales of ultra low volume, expensive, niche cars to Maximum Bob's golf buddies, further loss of market share to Honda and Toyota sounds like the OLD GM.
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bh 9:56AM (10/15/2009)
I wouldn't use such harsh terms, but I do think it was the sharp sales decline among their mainstream models that is responsible for this change.
Epsilon-Not 9:59AM (10/15/2009)
Yet let me guess, if transaction costs were said to be the same or lower, you'd say "GM needs to get people to pay more money for its cars, losing money on car sales sounds like OLD GM to me!"
alex 10:07AM (10/15/2009)
I think it has more to do with the quality of GM's new vehicles. Look at the old Malibu and the new Malibu. The new Malibu has roughly the same price as the old one, but transaction prices are way up because it's a nicer vehicle. It means it takes less incentives to move the car but it also means that people don't mind loading it up with options and paying a bit more because they see it as a really nice car, not a cheap POS.
bh 10:09AM (10/15/2009)
GM needs a healthy balance of mainstream volume with high-margin premium cars. Looking at the sales numbers, they didn't sell more luxury cars, just fewer mainstream cars -- Aveo, Cobalt, Malibu, and Impala sales are all half what they were a year ago. And besides the Impala in the large-sedan segment, those cars' sales are a fraction of the best-sellers in their classes.
The Aveo and Cobalt are perhaps the most extreme, and also the lowest-price cars that would have made a big difference to this average. The Cobalt sold just 7,300 units last month, not even good for the top-20 best-seller list (list here: http://tinyurl.com/yd8ea4e ), and the Aveo's sales fell from 12,000 to 2,000 in one month.
Tourian 10:17AM (10/15/2009)
@Todd
It amazes me how pundits stretch so far to make a negative comment. There is no way to spin increased transaction costs as bad news. Chevy and GMC now make up the majority of GM's volume. Those are regular mainstream cars and they have increased margins along with the Caddies.
Allen 11:14AM (10/15/2009)
The terms he put it in were definitely harsh, but he is essentially right. This time last year, GM sold many Cobalts, Aveos, and Malibus because of the spike in gas prices. Now, people are buying a better mix of vehicles like Tahoes, Camaros, and Silverados.
If you really want to gauge how well GM is doing, look at their incentive spending, which is still considerably higher than the industry average.
The Other Bob 9:53AM (10/15/2009)
I am not surprised. When I worked at a Saturn dealer, rarely did anyone take advantage of the return policy and when they did it was usually to upgrade the car to something with an option they left off.
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