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US automakers want you to buy a car

Gerri Willis gives advice on the pros and cons of buying a vehicle from a company threatened with bankruptcy.

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By Gerri Willis, CNN personal finance editor

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For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- GM and Chrysler are fighting for their lives. And that's hurting business. Almost 80% of people polled said they weren't likely to buy a new car from an automaker in bankruptcy according to a survey by Consumer Reports.

Here's what you should know before buying a car from a company that's in danger of bankruptcy.

One of the biggest concerns for car buyers is that if they bought a car from a manufacturer who is facing bankruptcy, the warranty wouldn't be honored. But now, Uncle Sam will be standing behind GM and Chrysler warranties. This program is called the "New Warranty Commitment Program."

The warranty program be funded by a blend of taxpayer and manufacturer money. It will cover consumers who buy a new GM or Chrysler vehicle during the restructuring period ... which began March 30. Consumers do not have to do anything to qualify.

That might allay some fears but you should still be wary if you decide to buy a car from a struggling automaker.

Depreciation is another worry.

New cars depreciate 20% after you drive them off the lot. But a car from a troubled company could lose 50% of its value in two years according to Edmunds.com. Bankruptcy translates into poor resale value.

GM's response is the "GM Total Confidence" program which covers the loss in a GM vehicle's value if, when you later trade your vehicle in for a new GM model, it's worth less than the total amount you still owe on it.

Under this program, GM will cover up to $5,000 if you trade the vehicle in or $2,500 if you sell the vehicle privately then buy a new GM (GM, Fortune 500) car within a week. GM's program is available through the end of April.

If you like to trade your car in every few years, you may want to stay away from buying a car from a distressed company. Of course, if you intend to run your car into the ground, the depreciation won't matter very much to you.

Also if you live in a small town, bear in mind that the local dealership may go out of business. And that means you may have to travel further to get your car serviced.

But there is a silver lining out there. You can get a great deal. Manufacturers and dealers are rolling out heavy incentives - and not just on SUVs and trucks.

Some of the best deals include cash back deals, low APR and special pricing programs. Chrysler has employee pricing plus program where customers can get employee pricing plus additional discounts on cars.

Now more than ever you want to shop around if you're looking for a new car. There are manufacturing deals plus there are discounts from the dealership itself. Make sure you contact several dealers since pricing can vary widely. To top of page

Gerri's Mailbox: Got questions about your money? We want to hear them! Send an e-mail,we'll answer questions on CNN, Headline News and CNNMoney.com.

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