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Does My Warranty Hold If the Manufacturer Goes Bust?

What happens to your warranty if the car manufacturer goes bankrupt? When you think about it, so many questions pop up and you’re suddenly unsure whether your warranty will hold even if the manufacturer goes bust. Let’s take a look at the common questions that car owners ask so that you’ll be better prepared if ever this happens to you. 

What Kind of Bankruptcy Filing Would it be?

In the US, it would likely be the Chapter 11 bankruptcy filing where the company can continue to do business as it renegotiates contracts and terms so that it can get some breathing room as it confronts its debts. 

In the UK, the equivalent of the Chapter 11 bankruptcy filing is the Company Voluntary Arrangements (CVA). With this, the company suffering from financial difficulties will enter into an agreement with its creditors where repayment will be made over a certain period for a percentage of the debt. 

How Will the Bankruptcy Affect My Warranty?

Most likely, your warranty will not be affected. The manufacturer must have seen that business has been going slow before they filed for bankruptcy. This means that they would do their best to take care of their existing customers and honour their warranties

Among the first things that companies that have filed for bankruptcy would do would be to ensure that they have the authority to honour warranties. Even if the manufacturer has stopped producing a particular model, they will still honour the warranties for that specific car model. 

What About My 0% Financing and Rebates

Don’t worry about your zero per cent financing and rebates because, in the same way that the manufacturer will stay committed to the warranties, they will also honour agreements such as these. In fact, it will be among their top priorities. Manufacturers do not want to lose their customer base by running away from their agreements. 

How Will the Bankruptcy Affect the Car’s Value?

This might be where you’ll encounter some challenges. Usually, car buyers avoid car brands that have gone bankrupt because they worry that the warranties may no longer hold or that it would be a pain to look for service or parts in the future. 

If you have a car that is only one to two years old, then it still has warranty coverage. But cars that are five years old or older will be less risky for the car buyer since they won’t have a lot of money at stake. 

Can I Still Get Car Parts?

It’s highly possible that business will go on as usual while the manufacturer is going through a restructuring process. However, they might be cases where the car manufacturer, as well as the parts supplier, won’t be able to come into an agreement with the new terms or renegotiated contract. If this happens, then the supply of car parts might have some disruptions.

What About Repairs?

Your repair bills might increase in this scenario where the manufacturer goes bust. Also, the repair process might take longer too since the auto mechanic would have to look for the needed parts from other suppliers. 

Will There Still be Car Parts in the Future?

Manufacturers are expected to have an ample supply of service parts. These should be available throughout the life of the vehicle. But this applies to parts that are made particularly for a specific make and model. During a bankruptcy, this may change. Some parts might be more difficult to find. 

Nonetheless, there would always be after-market parts. These are parts that are compatible with various car models. What this means is that the parts may or may not fit and function well for your vehicle. If you have no other choice, you can always try these after-market parts to see if they will work on your car. 

Takeaway

So, will your warranty hold if the manufacturer goes bust? Most likely yes, the manufacturer will do their best to honour their agreements with customers, especially warranties. They cannot afford to alienate their clientele. Manufacturers will do anything to keep their current customers happy. Hopefully, this article was able to answer your questions on the warranty of your car in case the manufacturer files for bankruptcy.  

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