GM Offers Deep Discounts On Discontinued Cars

Automaker General Motors is offering dealers big incentives to move thousands of vehicles from its discontinued Saturn and Pontiac lines at prices so low it amounts to a fire sale. John Stoll, a reporter for the Wall Street Journal, offers his insight.

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A cynic might call this next item: clunkers for cash - huge discounts on new cars with just one catch, you're buying the final year model of a discontinued brand. General Motors is offering dealers big incentives to move thousands of vehicles from its discontinued Saturn and Pontiac lines at prices so low, it amounts to a fire sale.

John Stoll writes for The Wall Street Journal and joins us now from Detroit. John Stoll, what is the offer that GM has made to its dealers?

Mr. JOHN STOLL (Columnist, The Wall Street Journal): Well, essentially, if you're a GM dealer and you happen to own a Saturn or Pontiac franchise right now, you're under extreme pressure to clear the lots and the inventory off the books because GM would like to start 2010 afresh and anew with their four core brands. So, the Saturns and Pontiacs on your lot, you can move them over to your rental car operation if you have one, if you're a dealer and have that sort of an operation, or you can move them into your service bay as a service loaner.

GM will give you a $7,000 allowance, read cash or check. And then you can move it directly into your used car lots. So it's a bit of accounting maneuver. But at the end of the day, the registered owner of that vehicle becomes the dealer, and GM in the month of December can chalk it up as an auto sale and it will help their market share. And ultimately it will help them clear the decks of Pontiacs and Saturns that remain. We're not talking about a lot of cars here, probably about 5,000, but enough to make this offer worthwhile.

SIEGEL: And if I were to go and buy one of these cars, it would technically then be a used car, not a new Pontiac.

Mr. STOLL: Right. Very similar to what you would be doing if you bought a demonstration vehicle off the lot, maybe a car salesman for a week or a month has been driving this car back and forth from home and work and may have 100 miles on it, maybe have a 1,000 miles on it - a lightly used, gently used or barely pre-owned, if you will, vehicle. And you get to basically not have to experience what a lot of new car buyers experience - and that is depreciation the second that you drive the car off the lot.

SIEGEL: It's a pre-depreciated car that you're buying.

Mr. STOLL: Yeah.

SIEGEL: Do they come with any kind of warranty or is that finished?

Mr. STOLL: Yeah, the warranty will come with the vehicle. The only thing that you lose are the miles that are on the vehicle. So, if it's a 50,000 mile warranty, you get 49,000 miles remaining. It is transferable. General Motors has been very, very adamant and vocal about their warranties on these vehicles being intact and legitimate. You will be in a situation if you're walking into a Saturn dealer, which typically stand alone, you will be in a situation where you may have to take your Saturn a few more miles to get it serviced and that is an inconvenience.

SIEGEL: Bottom line, what kinds of discounts might consumers find if they bought a Pontiac or a Saturn under these terms?

Mr. STOLL: You're going to find at least $6,500 off the asking price of a Saturn or Pontiac right now. That is advertised on GM's Web sites. It is in the newsprint. So you can take in your newspaper and show them. But beyond that there is extra room for negotiation, given the terms that GM has provided these dealers. So, you wouldn't be laughed out of the showroom if you were to ask for more than $6,500 off. They may not give it to you, but they understand that it is a buyer's market when it comes to Pontiac and Saturn right now.

SIEGEL: John Stoll, reporter for The Wall Street Journal spoke to us from member station WDET in Detroit. John, thank you very much.

Mr. STOLL: Thanks for having me.

SIEGEL: And one more bit of auto news. The Obama administration announced today that it's giving GMAC another cash infusion: $3.8 billion. That's on top of the $12.5 billion GMAC has already received in taxpayer funds since last December. The money will be used to buy preferred shares that will make the government the majority owner of the auto finance company which operates Allied Bank.

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