Home > General > GM takes on Hertz & Avis with FREE cars

GM takes on Hertz & Avis with FREE cars

September 11, 2009

gm logoFor really great Super Bowl parties, Rocky’s neighbor would  “buy”  large-screen TV’s at Circuit City on Saturday, and then return the TV’s the following Monday morning for a full refund. No questions asked. No cost. (Except that Circuit City eventually went bankrupt.)

This morning, GM announced a similar no-questions-asked, 60 day full refund on its cars. The promotion is called “May the Best Car Win,” and  GM Chairman Whiteacre coyly “declined to put a price tag on the overall promotion.”  That’s probably a good thing, since US Taxpayers are paying for this.

Click here for the full story from the NY Times: http://www.nytimes.com/2009/09/11/business/11gm.html

Forget about free toasters for opening new bank accounts. Forget about value meals at fast food restaurants. For consumers with a chunk of cash in their checking accounts, this is the largest giveaway in recent history. (An even better deal than “cash for clunkers.”)

Although the exact details have not been disclosed, here’s Rocky’s arbitrage analysis:

1. Money market funds are yielding approximately 0%, so there is no cost of money.

2. Buyers empty their savings accounts and purchase a new GM car.  They pay cash.

3. Title and registration (non-refundable) will cost about $250. Sales tax will be refundable if the transaction constitutes a “return.”

4. After 60 days, the car gets returned to the dealer. (And GM has lost 10%-15% of the car’s value.)

A Hertz rental car for 60 days will cost about $3,000. A GM “rental car” for 60 days will cost about $250.

[Disclosure: Rocky has no position in Hertz Group (HTZ) or  Avis Group (CAR). He does have a position as a citizen and taxpayer in the USA.]

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  1. September 11, 2009 at 9:08 pm

    Then I can buy one of those “used” cars cheap. Except I only buy Asian cars. Gotta keep the money in the home continent….

  2. allocator
    September 12, 2009 at 12:20 am

    You know what this means … road trip! What’s the nicest GM car you can buy, and who’s in? 🙂

    Cheers,
    George

  3. allocator
    September 12, 2009 at 12:23 am

    As for the Circuit City business model, it was pretty sporting of GM to go bankrupt first – just to show they mean it. 🙂

  4. Sam
    September 12, 2009 at 4:00 pm

    “A Hertz rental car for 60 days will cost about $3,000.”

    Did you actually check this number? I was looking at 90 day rentals recently and getting quotes around $1500. (This was for the compact car, though.)

  5. September 12, 2009 at 4:23 pm

    Sam: At Hertz.com, the lowest price GM rental (Chevy Impala) costs $2880 for a two month rental at JFK Airport. This amount excludes the liability insurance supplement ($12.95/day) and their collision damage waiver ($9.00/day).

    The price varies depending on location and time-of-year. At SFO, the same rental costs $2816 and at FLL, it costs $2370. If you have to pay for any extra days, it can cost between $50/day and $81/day extra.

  6. September 13, 2009 at 1:53 pm

    Fakename would like to take this opportunity, once again, to c*mplain about Cash For Clunkers (one letter concealed, since this is a family blog). Her 14 year-old Chevy Camaro, whose engine will soon disintegrate into specks of rust so fine that it will take the cast of CSI to identify the original source, did not qualify as a “Clunker”. Because its original combined city/highway mileage is 20. It’s a sad commentary on the state of the U.S. economy when a person has to mourn not being good enough to be a “Clunker”.

  7. Warren Murdoch
    September 13, 2009 at 7:42 pm

    The GM website states that you can opt out of the buyback program for $500. GM is not losing anything on this offer. Vehicle prices will include the embedded 60 day put option and they are very familiar with the endowment effect. There is also a mileage limitation in the offer–no cross country trips.

  8. September 13, 2009 at 7:49 pm

    Warren Murdoch: Thank you very much for your comment. Mileage limitations are useful, but whether the buyer drove 65mph in first gear is the unanswered question. So, based on your comment, $500 seems inexpensive for the put option. (As few subsequent purchasers would accept a pre-owned car for only a $500 concession.)

  9. Warren Murdoch
    September 13, 2009 at 8:29 pm

    I would not accept a previously owned car for only a $500 concession, but I wouldn’t buy a GM car for any concession. Most GM showrooms double as mortician parlors so this may bring some life to the dealers.

  10. September 13, 2009 at 8:34 pm

    Warren Murdoch: Again, thank you for your witty and insightful contribution. Taking your mortician observation literally, poses some problems. Rocky is unaware of any funeral home which allows a casket to be returned after sixty days of use.

  11. September 14, 2009 at 2:24 pm

    I see I have been edited 🙂

  12. September 14, 2009 at 5:23 pm

    Fakename: You were the one who said this is a “family blog.” The children, the children….

  13. September 14, 2009 at 5:28 pm

    Sigh, Fakename acknowledges that the editing was deserved. It was a momentary lapse on her part, due to the personal nature of the subject matter.

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