Small Business Taxes & Management^TM--Copyright 2009, A/N Group, Inc.

Or even a used one? There are some great deals to be had, on both cars and trucks, but be careful. While the GM and Chrysler situation may be in resolution mode, things are likely to be different at the dealer level. Here are some points to consider.

Some dealers will be terminated by GM and Chrysler. The good news is that these dealers are generally offering the best prices. They have to get rid of the cars. But don't expect 50 percent off. At some level the dealer is better off putting the car to auction.

Some dealers, not on the termination list, will probably go out of business. Slow sales combined with high inventory and possibly a heavy debt load could force additional dealers out. Some will be able to sell out; others may just go into bankruptcy.

New car warranties are backed by the manufacturer, not the dealer. All indications are that 5-year, 50,000-mile (or whatever the manufacturer is offering) warranty is safe. Both GM and Chrysler have pledged to honor it. There is a downside. You may have to go further to have the work done by a dealer and it's possible you'll have more problems getting satisfactory service.

Extended warranties are a little trickier. They may be provided by the manufacturer or by a third party. Make certain you know the details on the one you're purchasing. These warranties are not cheap and this is certainly the time to read the fine print. Don't rely on the salesman. In general, extended warranties don't make sense. That may be particularly true at this time. The extended warranty may not kick in until the manufacturer's warranty has expired. That's likely to be some years down the road. Will the manufacturer still be around? If the contract is from a third party, will they still be around? For a number of reasons, the risks are probably higher than in the past. On that basis alone you may want to skip the extended warranty. (Warranties can make more sense on luxury cars where the repair costs are often much higher and you're much less likely to junk the car if you're faced with a big repair bill.)

You may want to pick your new car by the nearest dealer. For example, you had your heart set on a Chevy truck but the nearest dealer is now a 30-minute drive. For slightly more money you can get a Ford from a dealer that's only 15 minutes away. While you don't have to go to a dealer for routine repairs and maintenance, you may prefer to and a dealer may be the only choice for some work.

Don't bet on perks offered by the dealer. Free oil changes for the next three years won't mean much if the dealer's out of business. Even if the dealer is bought out, the new owner is only liable if he buys the dealership in a stock transaction. If he buys the assets of the business, the new owner isn't liable. (The same warning applies to any purchase. For example, free tire rotation if you buy your tires from the local repair shop.) Use your judgment here. If you trust the dealer and you're set on the car to begin with, those free oil changes may be just icing on the cake. In the unlikely event the dealer does go out of business, you really won't be missing much. On the other hand, if the perks are worth a substantial amount, you may want to just negotiate the price down or move on.

Get the everything up front. You've probably heard it before. The car doesn't have heated seats or the upgraded wheels, but buy now and the dealer will put the features in when you come in for the first oil change. Unless the dealer is a real close relative or you happen to be the county sheriff, pass on that. In the current environment, you may have to badger the dealer to do it, or, in the worst case, never have the work done. If it hasn't happened to you, you've been lucky. Most car buyers have stories to tell of being stalled or worse.

Keep your maintenance records. Always good advice, but more important than ever now. If the dealer goes out of business, the records are supposed to be transferred, but there are probably more important issues to the dealer if the business is sold or goes under. Those records could be critical to having repair work done free under a warranty or paying the full amount out of pocket. If you don't have your records and your car is still under warranty, talk to your dealer to copies of them.

Traded in your car and have an unpaid lien? If you have a loan balance on a trade in, the dealer usually agrees to pay off the balance of the loan. But you're trusting the dealer here. And if he's in financial difficulty, he may not fulfill his end of the bargain. Since you signed on the original loan, it's your responsibility. Your only recourse is to seek restitution from the dealer. Not an attractive prospect. The same warning applies to leased autos.

Some models are selling at bigger discounts than others. That's generally true of trucks and SUVs. With gasoline prices on the rise, unless you need the carrying capacity, these vehicles probably don't make sense for most buyers. On the other hand, if you're a low mileage driver the discount may more than offset the higher fuel costs. Use caution. The resale value is likely to be low, so they're probably not a good choice if you're thinking about reselling the vehicle in a couple of years.

Think twice about buying an orphan. You probably don't want a low production car. Auto companies in general are cutting product lines that haven't been selling well. While there is considerable commonality among models, some parts are sure to be unique. A part that's in low demand is likely to be more expensive (because there's no after-market source), and/or take longer to get. That's especially true of body parts. While a low production vehicle stands a better chance of becoming a classic, that's probably not what you're looking for today.

Finally, the tax implications. If you're using the vehicle for business, buying new probably makes more sense. For cars purchased new in 2009, you can write off (via depreciation or Section 179 expense option) up to $10,960 (vs. $2,960 for used ones) and $11,160 (vs. $3,160 for used) for light trucks and vans. The benefits depend on your tax bracket; the higher your bracket, the more worthwhile purchasing new becomes.

--Last Update 06/09/09