Prices of six car models recalled by GM for switch defect plunge

While General Motors appears to have weathered the biggest safety and recall crisis in its history – staying profitable and selling more cars – the prices of used cars linked to the defect behind the scandal have plunged.

iSeeCars.com, a used car search engine, found that the average price of the six cars affected by GM’s ignition switch recall dropped by 14% from March through June compared to the same period a year earlier, adjusted for inflation. By comparison the average drop for all similar cars was 6.7% over the same time period.

“We surmise that the recalls are playing a role in motivating sellers to sell their used cars and at a lower price point than they otherwise would,” says Phong Ly, iSeeCars.com chief executive.

His company conducted a study of the models involved in the GM recall of 2.6 million small cars earlier this year because they have a faulty ignition switch linked to at least 50 crashes and 13 deaths. The automaker knew about the problem for at least a decade before recalling the cars. That delay has set off investigations of the company’s actions by the National Highway Traffic Safety Administration, the Department of Justice and Congress.

Despite setting aside billions of dollars to pay for recalls and crash victim payments, GM squeezed out a small second quarter profit and expects to be profitable for the entire year. GM sold almost 1.5 million new vehicles through the first half of this year, up 2.5% from the first half of last year, according to Autodata Corp.

Among the six models recalled for the switch problem, the Chevrolet HHR, Saturn Sky and Pontiac Solstice dropped less than the Chevrolet Cobalt, Pontiac G5 and Saturn Ion, iSeeCars.com found.

Prices for the sporty two-seat Sky and Solstice fell by about 10%. They held up better because of “their unique designs likely contributed to their desirability and helped them hold their value a bit better,” Ly said.

The price damage appears to be limited to only the vehicles GM recalled because of the deadly switch defect.

“Sellers of GM vehicles that were not recalled probably don’t need to be worried,” Ly said, “since our data indicates that the average price drop for the non-recalled GM cars during that timeframe is 7%, just slightly above the average of all cars.”

iSeeCars.com analyzed over 11 million used cars for sale by dealers from March to June 2013 and March to June 2014. The 2013 prices were adjusted to 2014 using inflation data from the U.S. Bureau of Labor Statistics.

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