By Quentin Fottrell
Saab’s bankruptcy could lead to lower prices on their new and secondhand cars, but car analysts say owning one now comes with more complications.
The news of Saab’s bankruptcy filing Monday was not unexpected, as the company has been operating under court protection from its creditors since September. But with no potential investors, the company’s assets will be liquidated over the coming months to meet the unpaid wages of its 3,400-strong workforce, as well as the money owed to its creditors. (Saab did not return calls for comment, but released this statement.)
Analysts say shoppers can expect better deals on Saabs. But they warn that buyers shouldn’t bite unless the dealer/seller can provide warranty protection, experts say. “When a brand is conceived to be dead, it immediately lowers the value of that brand in the eyes of consumers,” says Joe Wiesenfelder, executive editor of Cars.com. “In other words, that perception becomes reality.” Kurt Schirm, principal dealer of International Motors Saab in Falls Church, Virginia, says the cars have lost value and consideration. “We’ve been selling cars at cost and sometimes a little bit below our cost,” he says. He has also been offering rebates of up to $10,000 from the manufacturer.
Demand for Saabs will likely be flat or – more likely – immediately drop, analysts say, in contrast to the broader market. “Demand for use Saabs will start to drop off 2%-3% immediately,” Alec Gutierrez, senior market analyst at Kelley Blue Book. They already occupy a pretty small niche in the marketplace. They only sold 5,300 cars from January to November, up from 4,300 in 2010, but that’s not even one-tenth of the market. He sees demand in the U.S. car market rise 3%-5% in the first quarter of next year.
Saab prices have been lagging the overall market. Used car prices have risen 6%-8% annually for the last three years, according to the Kelley Blue Book, while new car prices have been relatively flat. However, used prices for Saabs have been down 6% since January, Gutierrez says.
Another caution sign: spare parts may be less available for owners in need of repairs. “Part availability is as much dictated by the market as much as the automaker,” Wisenfelder says. “That said, it’s not a high volume brand and where there is limited volume there is limited opportunity for a supplier.” Former owner General Motors has developed most of the recent parts, so there has been a lot of part-sharing, experts say. Schirm, who is also chairman of the Saab National Dealer Council, says he doesn’t see a lack of spare parts being an issue for several years. “In the aftermath of a liquidation or bankruptcy, Saab AB will be a source of long-term revenue,” he says.
And as the resale value of Saabs falls further –analysts were unwilling to speculate by how much – any insurance compensation consumers receive following a wreck will also decline. “The insurance company will look at the resale value of the car,” Wiesenfelder says. “Under the present circumstances, it’s more likely that they will total the car and hand you a comparatively puny check.”
For those who choose to buy now and navigate any warranty and spare parts issues, there will be far lower depreciation on the once sought-after luxury Swedish auto. Although dealers argue that used cars still offer great value, as SmartMoney.com reported, new cars can lose 15% to 30% of their value just in the first year of driving. “It eliminates one of the perils of owning a Saab,” Wiesenfelder says. “Despite the GM connection,” he says, “Saab is more of an independent entity, and the company itself appears to be liquidating rather than restructuring.”