Tuesday, February 23, 2010

Chrysler Gives 60-Day Money-Back Deal on Vans, Limited Risk to Chrysler

Chrysler is doing a slightly risky maneuver with its minivans, giving a 60-day money-back guarantee. If it doesn’t work, they’ll have a lot of slightly-used minivans back in their lots with car haulers moving them to fleet customers and auto auctions, with Chrysler taking a loss on the deal.

Such money-back plans often have sound economics behind them, since people will have to be pretty ticked with a car to go through the paperwork of returning the car, then going through the shopping, registration and insurance hoops of getting a replacement car for the lemony Chrysler. With a smaller-ticket item like a TV set or a laptop, the opportunity cost of taking an under-performing new product back is rather small.

Thus, Chrysler is banking on a manageable level of buyer’s remorse; buyers know that they can take it back, but as long as the Chrysler they bought is close to as good as the other vans available in 20-20 hindsight, the opportunity cost will be larger than the remorse factor and they’ll grudgingly hang on to their new van.

Vans tend to be high mark-up items for car makers, so they can afford to give buyers an emotional safety net. The once that do come back will drop in price and have to be sold as used, frequently to someplace other than the dealership for fear of depressing new van prices, so vehicle transport will likely be called upon to take it away either to a used car auction or to a car rental company.


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