GM takes on Hertz & Avis with FREE cars
For 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.]