Customers of some new GM cars will be forced to buy OnStar
FOX 2 - General Motors is bumping up the sticker price on many of its new vehicles adding a mandatory OnStar subscription, whether you want it or not.
This equipment is on new Buicks, Cadillacs, and GMC vehicles. And on Wednesday GM said you have to take it for $1,500.
"It's just like buying a car with seats and a steering wheel, you have to take this equipment," said John McElroy, auto analyst WWJ 950. "They're listing it as an option. And people are going 'I don't want to buy it.' Too bad."
But this just doesn't seem like an "option" but you do get a lot of technology...
"OnStar does a whole bunch of different things," McElroy said. "It will give you navigation staff, track your car if it gets stolen so the police can find it. It will give you all kinds of other different services, like a health checkup on your car, like tell you when you need an oil change or things like that."
And your car becomes a Wi-Fi hotspot. So the $1,500 will be tacked on to the purchase price which gets you three years of access to OnStar- and then, after the three years, you start paying monthly or the device will be dropped.
McElroy says GM is doing this because, at some point, car sales are going to stop growing. So how does a car company continue to grow its top line? Sell services.
"In fact, GM thinks that people will pay $135 a month above their car payment get all the services," he said. "And that turns out to be $10 billion a year."
With an 80 percent profit margin versus 8 percent for selling cars, look for other car companies to do the same.
But what's been the reaction charging for the mandatory OnStar option?
"Most of the reporting is negative," McElroy said. "I haven't seen anything that goes, 'Woo-hoo they're charging more."