“OVER $17,000 OFF!” a Boston-area dealer proclaims on its web site. “UP TO $16,000 OFF REMAINING 2011 SAAB MODELS” a Michigan Saab dealer yells in a mass e-mail. Even for folks who watched the mega-discounts roll in during 2009, that’s a shocking number. Glassman Saab of Southfield, Michigan, is hardly unique: Many other remaining Saab dealerships, too, are struggling to unload stocks of unsold cars. Great deals are to be had for savvy customers, and four-wheeled nightmares are just starting for those who don’t know what they’re getting into, as factory warranties have been suspended for many cars already on the road and the situation for those still unsold at dealers is a mess.
Dealers On Their Own
Virtually all auto dealers in the U.S. are individually owned franchises, and as such, all Saab dealers are on their own to decide how to get rid of remaining vehicles in stock. In the Midwest and on the East Coast, a number of dealers have joined Glassman Saab in offering tremendous discounts on current stock. Charles River Saab in Watertown, Massachusetts, is cutting prices by as much as $18,000 on some models. The cars with the greatest discounts are the ones with the highest sticker prices: fully loaded 9-5 Aero models. When they landed on dealer lots, these cars were priced around $50,000; for $32K, it’s a lot of car.
Other dealers are less bullish on the discounts. The sales manager at Dirito Brothers Walnut Creek Saab, located about 20 minutes from the Saab-friendly community of Berkeley, California, told us that it is not advertising big reductions. Discounts “in the five-figure range” are on the table, though. Dirito is in a different situation than Charles River: the former has just nine cars in stock, while the latter has 40.
Regardless of the prices, however, financing will become progressively more difficult for buyers to arrange. Just as it’s harder to get a loan for a used car than for a new one, with Saab going bust, its cars are less appealing for a bank. In large part this is because the cars are on the brink of huge depreciation. That means owners will owe more than the cars are worth; if the bank has to repossess, it is going to lose money.
Warranties and Parts: More Exciting Than They Sound
Warranty payments to dealers, which come from Sweden and pay dealers for working on warranteed cars, have been suspended. This means that dealers won’t get reimbursed for repairs they make on vehicles theoretically covered under warranty. A few dealers we spoke with said they’re taking a haircut on money owed for work they’ve done in the last few weeks.
Vehicles still under the original warranty but sold before January 1, 2010, while General Motors still owned Saab, will be covered by GM. This still leaves thousands of vehicles on the road, though, that were sold after that date—as well as brand-new Saabs sitting on dealer lots with fat discounts on the hood.
The president and COO of Saab North America, Tim Colbeck, says that his company—which is the importer for Saabs in the U.S. and Canada—is looking for ways it can honor the warranties of non-GM–era cars and even unsold Saabs. We’re skeptical that this is possible. There are two options: One would be to buy everyone an aftermarket warranty. While a few dealers are doing this for new cars (more on that in a moment), this is extremely expensive. Saab North America doesn’t have the cash. Alternatively, Saab North America is attempting to convince General Motors to pick up warranty coverage even for cars sold after GM exited. The argument is that because GM owned Saab for decades, many people who own Saab franchises also own the rights to sell one or more GM brands. Ticked-off Saab owners leaving the service bay of Anytown Cadillac GMC Saab will be turned off to the first two brands. While this might be a realistic scenario, we don’t see it convincing GM to take on a ton of liability by assuming warranty payments on cars sold after it exited. A GM spokesperson had no comment, of course.
In addition to leaving many drivers on the road with no warranty, new cars at dealerships now must be sold “as-is,” without a warranty. In Massachusetts, as in many other states, it’s illegal to sell a new car without a warranty. So Charles River Saab is tacking on four-year, 75,000-mile aftermarket warranties to its 40 cars still on the lot. The sales manager says it’s not cheap. Dealerships could also do what Chrysler did with unsold Crossfire stocks many years ago and mark the unsold Saabs as “used.” This just requires a bit of paperwork, and excuses the need to warranty the cars, among a few other legal obligations set for selling new vehicles.
Fortunately, the situation with Saab parts is much less grim. Fearing the worst was coming, many dealers—like Charles River—have stocked up on parts during the past year. Because Saabs are so closely related to many General Motors cars, many parts are useful for both. Saab’s 9-4X crossover is the most extreme example, built in Mexico alongside the Cadillac SRX. Even for Saab-unique parts, there’s good news. Most of the parts manufacturers are not owned by Saab, and will likely remain in business. There are still hundreds of thousands of modern Saabs on the road, and regardless of what happens with the corporate entity of Saab, there’s a great business case for the manufacture and sale of parts to fit these cars.
To Buy or Not to Buy: That’s Not Much of a Question
The very human (and very American) desire for a bargain says that a $20,000 Saab 9-3 or $30,000 9-5 is a decent deal. Maybe it’s what these cars should have cost before their maker went bankrupt; at these prices, they could be reasonable.
In light of the warranty and parts situations, it still may make sense for people to buy them. Unless you’re buying from a dealer that is throwing in an aftermarket warranty, you’ll need to buy one yourself. We were quoted between $2000 and $2500 for a no-deductible, four-year warranty from a major provider that allows service at any certified mechanic. This would include former Saab dealerships, which is where we’d go; most plan to remain in business servicing and supplying parts for Saabs as long as there is demand. Judging by how long former Alfa Romeo and Peugeot shops hung around after their brands exited the U.S., finding a specialist for Saab service shouldn’t be a problem for at least the next decade.
Still, prospective buyers aren’t hugely interested. Many dealerships with whom we spoke are seeing Saab loyalists in the showrooms trying to stock up with one last new car. They seem to outnumber the bargain hunters. We asked Carl Bagnini, a social worker from Port Washington, New York—and the past owner of four Saabs—whether the prices would draw him into the showroom. No, he says. Bagnini ditched his 9-5 wagon last year when he realized he could get as much content for much less money by buying a Volkswagen Jetta SportWagen TDI. Like so many other once-loyal Saabists, he’s moved on from the brand.
The hitch for all of this is that you’d have to be willing to hold on to your Saab for quite a long time. Even before Saab announced plans to go bust, resale values for these Swedish cars were horrendous. We spoke with Eric Lyman of Automotive Leasing Guide, who told us that even before the bankruptcy was announced, a 2011 Saab 9-5 with the turbo four would retain only 34 percent of its value in three years. That means such a car purchased today for $41,000 would be worth just $14,000 in January 2015. If the brand goes out of business for good—as all signs suggest it will—then it’ll lose only another grand.
In other words, Lyman says, Saab going bust isn’t what will slam the value of its products; it’s the company’s huge discounts and unfortunate reputation during the past decade. Historically, cars from orphaned brands don’t take as much of a hit as you might think. Three years after cancellation, Plymouths retained five percentage points less of their original MSRP than did Dodges and Chryslers sold the same year. But three years after their marques were killed, Oldsmobile, Saturn, and Pontiac cars all have done fairly well; they’re worth, on average, just $1000 to $3000 less than surviving Chevrolets and Buicks from the same vintage.
These numbers in particular show the real lesson from Saab’s collapse: It can take a year or two of haranguing in court and bank boardrooms for a car company to go out of business, but the meaningful damage is done long before. Saab’s bed has been made for years.
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