Closures could bring trouble for car owners

With thousands of Chrysler and General Motors Corp. dealerships closing, customers could be confronted with problems over warranty coverage, trade-ins and other matters.

Both automakers pledge to make the contraction as painless as possible, but that doesn’t mean there won’t be problems.

“When all of these relationships are disrupted, you can’t help but have some elements of chaos, and some practical problems occur,” said Aaron H. Jacoby, a Los Angeles lawyer who represents car dealers.

Here are some issues GM and Chrysler customers may face.

Manufacturer warranties

These are the warranties that are included in the price of a vehicle and cover specified repairs for a specific period of time – three years or 36,000 miles, for instance. They’re backed by the manufacturer, not the dealer, and are good at any of the manufacturer licensed dealers.

GM and Chrysler have pledged to stand behind their warranties.

But consumers still could face a long drive to the nearest authorized dealer. And customers who have a long-standing relationship with a particular service manager may find themselves at the mercy of one who is less attuned to their interests, notes Philip Reed, senior consumer advice editor at auto Web site Edmunds.com.

Warranty complaints should be directed to the manufacturer or a state’s new motor vehicle board.

Extended service agreements

These go by many names, often vehicle service contracts or extended warranties, but the bottom line is generally the same: For an additional charge, the contract pays if certain things go wrong with the vehicle for a set period of time – usually after the manufacturer’s warranty runs out.

These contracts typically are backed by a third party – known as a vehicle service contract provider – or by the manufacturer. If backed by Chrysler, the automaker said its other dealers will honor the contract. If backed by a contract provider, Chrysler said the vehicle owner should check the contract for information on where to go for repairs.

Unpaid liens on trade-ins

When a car buyer trades in a vehicle with an outstanding loan balance, the dealer is supposed to pay off the loan as part of the transaction. But as dealerships have closed during the recent collapse in auto sales, many of them didn’t pay off the loans.

In these cases, consumers are still liable for the original loan and can end up with two monthly payments – one on the car just bought and a second on the car traded in. And if the trade-in vehicle is re-sold before the loan is paid off, the new owner of the used car may not be able to get a title.

Vehicle repair history

Failing to perform recommended service can invalidate a warranty – and lacking the records to prove the services were performed can have the same result.

Maintenance records should be transferred when a dealership closes, but don’t count on it. Car owners who haven’t kept their own vehicle repair records should get copies while their dealer’s doors are still open, said Pat Goss of Carchex, a provider of consumer automotive services.

“Paperwork can easily fall through the cracks,” Goss said. “Even one item missing or one page corrupted could be serious trouble in trying to prove a warranty claim in the future.”

Financing

Financing arrangements should not be affected by the dealer closings.

Sales perks

If a dealer promised a special incentive – such as a year’s worth of free car washes – and then closed its doors before fulfilling the bargain, other dealers aren’t obligated to provide the service.

Buying from a dealer going out of business

Since Chrysler and GM have pledged to stand behind their warranties, it could be a good time to hunt for bargains as dealers try to unload inventory. The vehicle can be taken to another dealer for warranty repairs if necessary.

But experts note that prices already have been slashed to the bone to cope with the current sales slump, so some dealers may be unwilling to cut prices as much as some buyers expect.

“You should be able to get a good car at a damn good price,” Reed of Edmunds.com said. “But you can’t just pick a number out of a hat and expect them to take it.”

In addition, with sticker prices already low, buyers need to be wary of aggressive attempts to get them to buy pricey add-ons, such as extended warranties or fabric protection, he said. And with so much unsold inventory sitting on dealer lots, buyers need to make sure that the car they think is a 2009 model isn’t actually a left-over 2008, Reed said.