Uncle Sam Is Now in the Car Warranty Business

As GM and Chrysler move closer to bankruptcy, the Obama administration is making some moves to shore up the confidence of potential car buyers. One of the key initiatives is the Warranty Commitment Program, which would ensure that car buyers would still be covered by warranty even if the car makers go into bankruptcy. The program, which will cover the cost of repairs on cars under warranty, will be partially funded by the car makers, but the bulk of the cash will come from the US Treasury.

The warranty program will cover cars bought during the car makers’ “restructuring period,” which the Treasury has defined as beginning on March 30. Although the program is open to any US car manufacturer, Ford, which is not asking for government aid, is not expected to participate. Foreign car makers are not eligible to join the program. Government officials emphasized that the warranties issued under the program are the same as the warranty that normally comes with the car. Consumers will not have to do anything differently — repairs covered under the warranty will be paid for whether they are done at a dealership or by a third party.

Other government efforts to inject life into the comatose car market include a plan that would allow car buyers to deduct any sales or excise taxes on vehicles bought between February 16 and the end of the year. Also on the table is a plan that would give consumers a tax credit when they switch from an older gas guzzler to a more fuel-efficient new car.