GM Sends a Message to Dealers, Flippers with Warranty Threat

Bernice

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GM is continuing the fight against dealers and flippers looking to extract extra cash from buyers of its in-demand vehicles, telling them parts of a certain vehicle’s warranties are non-transferrable if that vehicle is sold a second time in less than a year.

2023 Cadillac Escalade-V ESV - parked side 3-4
GM’s telling dealers parts of the warranty on popular models will be voided if that vehicle’s sold a second time in less than a year.

The company’s applying the rule to its new Chevrolet Corvette Z06, Cadillac Escalade-V and GMC Hummer electric SUV. It’s the second time this year, the company’s taken steps to keep customers from being gouged on the price of these hot vehicles.

Company officials told Jalopnik, if ownership of the of a Corvette Z06 or Escalade-V is transferred from the original owner within the first 12 months of delivery, the Bumper-to-Bumper, Powertrain, Sheet Metal, Tire and Accessory coverages will be voided.

In the case of the Hummer EV, if ownership of the vehicle is transferred from the original owner within the first 12 months of delivery, the Bumper-to-Bumper, Electric Vehicle Propulsion, Sheet Metal, Tire and Accessory coverages under GM’s New Vehicle Limited Warranty will be voided. The Battery Warranty Coverage will not be affected for Hummer EV.

Why the hard-ball tactic?

2022 GMC Hummer EV pickup front
The 2022 GMC Hummer EV is one of the three vehicles GM is looking to protect.

Prices of new vehicles have already risen by double digit amounts during the past two years due to strong demand and a dearth of supply due to the ongoing semiconductor shortage. In fact, last month, the average price of a new vehicle hit a new record high, of $48,083.

The lack of high-priced in-demand vehicles is even worse, leading many dealers charge additional dealer markups in the five-figure range for some of the vehicles mentioned previously and others like them. Additionally, some consumers are buying these vehicles and also turning around and selling them for astonishing numbers. It’s not unusual to see 25%, 30% and even 50% markups on some vehicles.

Dealers assert — rightfully, in some instances — their ADMs prevent flippers from cheating them out of money they should be able to collect. However, automakers claim adding fees, regardless of the label or name used, causes mistrust among the general public, hurting the brand in the long run.

GM isn’t the only automaker trying to mitigate the extra fees demanded by dealers or flippers. Ford CEO Jim Farley said dealers charging outrageously high markups would see future allocations reduced or even eliminated. 

GM's Steve Carlisle
Steve Carlisle, president, GM North America, said the policy is being implemented to ensure “an exemplary ownership experience.”

Does it work?

Automakers are pretty limited in what they can do to address the issue, but they are clearly trying to get it under control. GM’s not stopping at just voiding the warranty on the specified vehicles, they’re looking to send a message to flippers too.

“The person who attempts to flip one of these high demand vehicles by selling it during their first year of ownership is prohibited from placing future sold orders for certain high demand products (identified by GM). So there is significant risk to the flipper’s future ability to buy, in addition to providing an incentive for a customer to buy new and receive a warranty rather than buy from a flipper,” a GM spokesperson told Jalopnik.

The primary person who gets impacted by these deals is the second buyer of the vehicle, when they discover their car or truck is no longer under warranty. Not exactly the ideal ownership experience.

“These changes are being implemented to ensure an exemplary customer experience, to ensure our brands remain strong, and to help prioritize ownership by brand enthusiasts and loyal customers,” wrote Steve Carlisle, president, GM North America, in letter sent to dealers across the country.

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