GM's $7K Discount ... to Dealers


Months ago, GM announced it would be eliminating both the Saturn and Pontiac line of cars and trucks and, now, in an effort to clear out the remaining inventory, the automaker is offering huge discounts on the cars. However, the deal is not as cut and dry as the typical auto discount.

According to the Associated Press, “The automaker will pay dealers $7,000 for every new Saturn or Pontiac left on their lot if the vehicle is moved to dealer-operated rental or service fleets, according to The Wall Street Journal, which cited a letter mailed to dealers. This allows the dealers to sell the cars and trucks to consumers at a discount, although the vehicles would be labeled as used because the dealer would technically be the first owner.”

So, in order for the consumer to realize the savings, the dealer essentially has to buy the car from Saturn, and then resell it to the public (the offer expires Jan. 4).

Why is it so complicated?

We spoke to Ed Panebianco, a manager at Saturn of Union, N.J., who explained that in order for Saturn dealerships to continue to operate as a Saturn service center (offering repairs and maintenance of Saturn vehicles), they must keep at least two or three Saturns on the lot. This requirement will continue to be in place, according to Panebianco, until October of 2010, when the Saturn operations will shutter entirely.

At this point, Panebianco says that they only have two or three Saturns on the lot. “You can’t sell those cars,” he says. “Even if someone comes in and says I want the car, you can’t sell it to them.” Many Saturn dealers will find themselves in a similar position. Saturns, after all, have already been deeply discounted for months. If a dealer only has a couple of Saturns left on the lot, buying the cars from GM at a $7,000 discount may not seem like such a sweet deal because they will have to sit on the cars until next October. Who knows what the cars will be worth then?

If, on the other hand, a dealer has 20 or 30 new Saturns on the lot, it may be worth it for them to buy the cars from GM and pass the savings off to the consumer. Even in this case, however, there are hurdles to overcome.

As the CBSNews EconBlog notes, “buyers will face certain risks: future resale value might be hurt by the fact that it was bought as a used car. And there may be reluctance to purchase a car from an "orphan" brand, even though GM has said it will honor existing warranties.”

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