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GM Warns of Voided Warranties for Flipping Cars

To minimize the flipping of several of its high demand, limited production vehicles, General Motors will void the warranties if they are resold within a year of purchase.  In addition, dealers that engage in flipping will be barred from purchasing additional such vehicles from GM in the future.

Video Spotlight:  

This post is based on the Autoblog article, GM threatens predatory dealers with order cancellations, nontransferable warranties, by Byron Hurd, July 29, 2022; the Fox Business article, General Motors to void warranties on hot cars and trucks that get flipped, by Gary Gastelu, August 1, 2022; the GM Authority article, GM Reducing 2023 Cadillac Escalade-V Ownership Requirement From 12 To 6 Months, by Jonathan Lopez, September 1, 2022; and the YouTube video in the Spotlight. Image source: Ronnie Kaufman/Getty Images

Discussion Questions:

1.  What has been happening that has caused GM to take such an unusual step?

Guidance: In an automotive market that has suffered severe discrepancies between supply and demand over the last couple of years, special high-end models are selling for unbelievable prices due to their short supply.

As an example, the 2022 Hummer EV which had a starting price of $112,595 has sold for in excess of $250,000 at resale auctions.  One was even seen to go for as much as $324,000.

In addition to the Hummer EV, GM’s 2023 Chevrolet Corvette Z06 and its Cadillac Escalade-V are due out soon.  The automaker wants to nip in the bud any attempts to flip these cars by threatening dealers, resellers, and consumers with serious consequences that may actually work.

2. What are the consequences of flipping these vehicles?

Guidance: If someone resells one of the three aforementioned vehicles within 12 months of purchase, bumper-to-bumper, powertrain/electric vehicle propulsion, and other warranties will not transfer to the new owner.  Recalls will still be covered, but otherwise, the new vehicle owners will be left largely unprotected if something goes wrong.  In addition, if dealers flip these cars, they won’t be able to order more to sell in the future.

3. Why is GM so concerned about its cars being flipped?

Guidance: Warranties and length of service promises can be key selling points for manufacturers and an important way of supporting a strategy of high quality.  High end vehicles that also protect the buyer with strong warranty coverage can build favorable perceptions and long-lasting brand loyalty.

Conversely, if someone buys a flipped vehicle and is either knowingly or unknowingly left unprotected, serious negative perceptions and word of mouth publicity may follow when things go wrong and need to be repaired.

In addition, GM wants to make sure that its cars go to actual GM fans who want to become or continue to be loyal purchasers of its vehicles.

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