Should I Buy A Car From A Dead Brand?

July 15, 2010

Their names are the road kill of the recession--HUMMER, Pontiac, Saturn, Mercury and Oldsmobile. Does their purchase represent opportunity or pitfall? After all, they have proven that their brands will not stand the test of time, but does that really matter?

Buying a discontinued brand is like purchasing a house that is located on a main road, you pay less for them on the front end but when you sell it’s usually for below market value. The real question is whether you want to put up with waiting for traffic each time you leave your driveway. Owning a dead brand has the same kind of daily hurdles as well.

One good thing is that the car doesn’t depreciate when you drive it out of the showroom--that happened when it was announced that the brand was history. The sticker price reflects it. The dealers would rather have brands on their lot that represent their future, not their failed past.

Don’t confuse the passing of a model with the demise of a brand. In the case of cars the model is the first name while the brand is the last name. So when we said goodbye to the Delta 88, there were still Oldsmobiles, but now Oldsmobile will only be a memory.

Service and repair concerns are real and consequential. All the brands mentioned fall within the General Motors or Ford lines of autos, which is a good thing. Pontiac and Oldsmobile probably share a majority of their parts with Buick and Chevrolet, just as Mercury does with Ford or Lincoln. So many of the parts needed to repair, for example, an Olds Regency may still be available because they also fit a Buick LeSabre.

On the other hand, HUMMER and Saturn parts are not so integrated within other GM lines. Some HUMMER parts may be used on GMC trucks but the interchangeability does not exist to the degree it does in the GM car lines. Saturn is another example of this. However, the marketplace will respond as need presents itself; if repair parts are in demand and the opportunity exists for profit the aftermarket parts manufacturers will react accordingly.

The warranties involved are as good as the financial strength of the car companies. In the case of the new General Motors you might say that they have the federal government backing them up since the U.S. owns 60 percent of the company. Ford of course is the only domestic car company that did not need federal assistance.

Deciding to buy a dead brand need not be a stressful decision. If you plan to keep the car for less than the average ownership time of six years, it’s probably not a good idea. However, if you drive your cars until they are well seasoned the purchase may provide an opportunity to save some money.  

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