What’s Behind GM’s New 60-Day Money-Back Guarantee?

  • Share
  • Read Later
Paul Sancya / AP

U.S. flags are shown outside of General Motors world headquarters in Detroit on April 18, 2006.

Getting our money back for purchases we no longer want or need is the norm almost everywhere except car dealerships. But this summer, you’ll be able to drive off with a Chevy and then return it weeks later.

On Tuesday General Motors announced that it was offering a 60-day money back guarantee on all of its 2012 and 2013 Chevrolet models while also marking down all 2012 models to “no-haggle” prices, significantly lowering their suggested retail prices.

(MORE: The Thrift Store: Not Just For Penny-Pinching Grandmas Anymore)

GM has been losing ground to Toyota as car sales continue to pick up after dropping off due to the recession and the Big Three’s financial troubles. Industry-wide, auto sales increased by about 15% in the first half of this year. Toyota’s sales gained 29% but Chevy’s only rose a little more than 6%.

As GM starts feeling pressure from Toyota, the new “Love It or Return It” program is largely designed to get new buyers to consider a Chevy. But while the promotions may boost a brand’s image, it’s unclear whether these sorts of programs actually boost sales.

One auto industry consultant told Bloomberg News that such programs are often “marginally effective” and that he doubts this one will attract a large number of new customers.

But GM disagrees, saying that “research has shown customers respond positively to the confidence companies demonstrate with programs like this and appreciate the peace of mind that comes with knowing they have the option of being able to return their vehicle,” a Chevy vice president told CNNMoney.

(MORE: More Americans Planning to Spend Less on Travel This Year)

This isn’t the first time GM has had a money-back program. In 2009, the automaker offered a 60-day money-back guarantee on all Chevy, Buick, GMC and Cadillac vehicles. But even then, GM says fewer than 1% of buyers made a return.

To take part in the program, the vehicle must have fewer than 4,000 miles, it must be undamaged, the buyer has to be up-to-date on payments and the vehicle must be returned between 30 and 60 days from the purchase date. The promotions began Tuesday and will run through Sept. 4.

While the money-back program may help GM’s image overall, the “no-haggle” pricing program, called Total Confidence Pricing, is essentially designed to allow GM to clear out its end-of-model-year vehicles so it can make room for the 2013 line.

But like the money-back guarantee, no-haggle isn’t new either — even for GM. The automaker used no-haggle pricing when it still manufactured and sold Saturns, but it turned out that some over-eager dealerships found ways around the policy, like adding on expensive options.

And even though we may hate haggling with car salespeople, the apparent failure of the latest JC Penney “fair and square” pricing model — which relied on everyday low prices rather than sales promotions — suggests that we hate paying the manufacturer’s suggested retail price even more.