NEW YORK (MainStreet) — General Motors is scaling back warranties, free maintenance and free roadside assistance on many of its models, but experts say the move will likely hurt dealers more than consumers.
"There are a lot of [free programs] that go unused because drivers either forget that they have them or don't care to use them," says Jack Nerad of Kelley Blue Book.
GM announced plans this month to reduce the length of Chevrolet and GMC powertrain warranties to five years or 60,000 miles beginning in the 2016 model year — a 40,000-mile drop. The company also intends to cut 40,000 miles from the brands' free roadside-assistance and courtesy-transportation programs.
Additionally, GM will reduce free maintenance on not only Chevrolets and GMCs, but also on Buicks. Those plans will drop down to two no-charge visits during the first 24,000 miles of ownership, from the four owners get today.
"We talked to our customers and learned that free scheduled maintenance and warranty coverage do not rank high as a reason to purchase a vehicle among buyers of non-luxury brands," GM Vice President Steve Hill said in announcing the changes.
He said the automaker plans to "reinvest" the money it's saving on "other retail programs that our customers have told us they value more," although the company didn't elaborate.
GM has offered five-year/100,000-mile warranties on the affected models since 2007, as well as four free free-maintenance visits per year since 2013.
But Nerad says automakers study carefully how different programs affect sales and drop perks that don't translate into enough extra volume to justify the cost.
"What GM and other companies have found is that they just don't get as much bang for their buck out of generous warranties," the expert says. He predicts the automaker will use the money saved to lower prices, buy extra advertising or do other things it believes will better boost sales.
In fact, Nerad thinks the scale-back will actually affect dealerships more than drivers, as retailers love maintenance and repair programs paid for by manufacturers.
"Car dealers know they don't have to chase the customer down for money when consumers come in for warranty work — and many consumers often end up getting additional work done, too," he says.
The analyst adds that GM's moves shouldn't affect many consumers because:
- few people drive more than 12,000 miles annually, which means they won't exceed the revised five-year/60,000-mile warranty limit;
- many Americans belong to auto clubs such as AAA, so they don't need GM's free roadside assistance;
- losing two free maintenance programs will probably cost the average car owner less than $100.
GM's coverage will also still match what many rivals offer, even after taking the lower mileage rules into account. For instance, Fords and Toyotas come with the same five-year/60,000 powertrain warranties that the affected GM models will now carry.
Nerad adds that buyers who "want some peace of mind that the new car they're buying isn't a lemon" can always seek out lines that offer more generous guarantees.
For example, GM's Cadillac division will continue to offer six-year/70,000 mile powertrain warranties, as will Ford's Lincoln division and Toyota's Lexus brand.
South Korean automakers Hyundai and Kia are also famous for offering industry-leading 10-year/100,000-mile powertrain coverage, as does Japanese manufacturer Mitsubishi.
Kelsey Mays of Cars.com says GM's move will make the affected cars "a little less competitive" against rivals with longer warranties, but says consumers should come out fine if they stick to models known for good reliability.
For instance, seven GM vehicles recently ranked No. 1 in their respective categories in J.D. Power and Associates' 2015 Vehicle Dependability Study.
"Consumer care about warranties," Mays says, "but they care about overall reliability even more."
— Written by Jerry Kronenberg for MainStreet