Cheapskate Q&A about Buying Cars with

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What happens to your warranty if the car manufacturer is in bankruptcy?’s senior consumer advice editor and blogger Philip Reed answers that question and more.

Cheapskate: A lot of people worry about warranties not being honored by car manufacturers that have entered bankruptcy, like GM and Chrysler. Is this a legit concern?

Philip Reed: Not really. We’ve seen brands disappear in the past, like Oldsmobile, and those warranties were still good. Keep in mind that GM and Chrysler have only entered bankruptcy. They’re not going away anytime soon. I’d say they’ll be around at least three years, probably much longer. The government will pick up the warranty, if necessary. If that happens, there might be some red tape involved, however, in getting your car serviced under warranty.

With the closing of dealerships, however, you should consider that you might have to travel further to get your car serviced by a dealer. The one down the road from you may be closed. Also, I think a lot of people are confused about what a warranty actually includes. Routine maintenance, like getting your oil change or the tires rotated, is not generally included in a warranty. Besides, any mechanic can do those things for you. The warranty helps you if the car breaks down, and if that happens, you’ll be covered, even by a manufacturer in bankruptcy.

CS: Even with pretty big discounts, are Chryslers and GMs worth buying?

PR: With Chrysler, there’s not much there I can get behind. Some of the Jeeps are solid. The Chrysler dealerships that are closing have already been picked over quite a bit. I imagine lots of unattractive colors, and models that aren’t at the tops of anyone’s list.

GM is in a different situation. Their dealerships that are going to be closed won’t be shut for another year, so there’s no fire sale mentality yet. My message would be: It’s more important than ever to negotiate. The rules are different than they have been in the past. This is unprecedented terrain we’re in. The dealers have lots of discretion. In the past, you might have known that a dealer wouldn’t go much below invoice. But today? Who knows? Some dealers really just want to get rid of those cars.

CS: What are some good tips for handling car salesmen? Are there ways to know they’re lying?

PR: Always call first. If your first interaction with a salesman is at the dealership, you’ve lost the upper hand. It’s much harder to walk away in person than it is to hang up on somebody. Use your intuition, and be on the lookout for conflicting or vague info. One trick is to ask questions you already know the answers to, like how this year’s model is different from last. It’s OK if the salesman doesn’t know every little detail and needs to double check something. But it’s not OK if he straight-up lies to you, or if he’s not really listening to your questions. Only do business with someone who answers your questions accurately and clearly. Never enter into negotiations if you feel uncomfortable.

CS: Thanks Phil. For some enlightening and often hilarious insight into how salesman operate, and how you should react, check out Edmund’s stories “Confessions of a Car Salesman” and “Test-Drive Your Car Salesman”.