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Saab: Bankruptcy and the Buyer

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author photo by Colin Ryan

Saab has filed for bankruptcy. This isn't the same kind of bankruptcy that General Motors went through and came out the other side still in business. Saab will be liquidating its assets, ceasing to exist. Someone may still come to buy the company, but no one should hold their breath.

Could now be a good time to buy a new Saab? Showrooms will want to offload any cars they have in stock as quickly as possible, to make room for other brands that are still alive and kicking (or sell up and close the franchise). So a deal could be had - especially considering how the current, relatively new generation of 9-5 is considered one of the best Saabs of the past 20 years.

The thing is, how sweet would that deal really be? "Consumers should be aware that although they can likely get a screaming deal on a new Saab, the vehicle's warranty remains questionable. So there is certainly a risk to go with the reduced sticker price," said Alec Gutierrez, senior market analyst with Kelley Blue Book. "As of December 1, there were approximately 2,400 new Saabs in inventory across the United States - still more than enough to satisfy demand.

From this moment, however, values of all Saabs have dropped - except, perhaps, for old collector's items. However much is chopped from the MSRP of a new Saab will have a knock-on effect when it comes to resale time. It's a personal decision whether it's worth taking that hit or not. And that's just the entrance to the minefield.

"Saab had a four-year, 50,000-mile, bumper-to-bumper warranty," said Gutierrez. "Owners who purchased a Saab in the last several years may now find themselves holding the bag when something goes wrong with their vehicle if the company is no longer around to cover warranty repairs."

"Even if warranties are no longer honored, replacement parts should be available due to the significant amount of components sourced from GM," said Gutierrez. "Parts availability does not equate to warranty support, though, so owners of late-model Saabs will still likely be on the hook for major unexpected repairs."

When GM discontinued Pontiac and Hummer, it was understood the company would still honor warranties. With Saab, it's not clear how much support, if any, will come from GM.

Over a longer term, sourcing replacement parts may still be an issue. If a Saab is involved in an accident, the insurance company may decide to write the whole car off and make out a reduced check to the owner.

The bankruptcy announcement will also affect used Saabs. "We are expecting values of used cars to increase three to five percent in the first quarter of 2012," said Gutierrez. "We believe values of used Saabs may under-perform by as much as two to three percent in the coming months."

We could have long arguments into the night on how GM might or might not have mismanaged Saab when the small Swedish company was under the big American automaker's wing, but that still won't help residual values. Nevertheless, it's worth thinking about how Saab got into this situation in the first place. Product.

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Despite a core of enthusiasts, one not big enough to keep the marque afloat, Saabs just weren't selling well: 133,000 cars in 2006 to 27,000 in 2009. Think of all the popular cars with strong resale values, like Mini and Honda. They're good products that people want to buy.

So consider that fact when the temptation comes to walk into one of the few remaining Saab dealers with a wad of cash. And consider this: in a recent study by J.D. Power and Associates on vehicle dependability, Saab came a fair-to-middling 13th out of 34. Is it really worth the gamble?

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
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Saab: Bankruptcy and the Buyer