• Jan 20, 2009
Show me the money. With apologies to Cuba Gooding Jr., that is exactly what many General Motors dealers are saying to GMAC Financial Services.

Despite being given $5 billion from the U.S. Government last month, GMAC apparently hasn't loosened its purse strings enough for dealers' likings. Some, in fact, are reporting that GMAC keeps rejecting their credit applications. This is somewhat surprising because GMAC previously agreed to lower the necessary minimum credit score ratings from 700 to 621 for new vehicle loans, so presumably more requests should be going through. Dealers are frustrated and although some preferred dealers have seen loan rate reductions, others are saying that GMAC is still as much as 1.5 percent higher than the competition.

In response to this problem, dealers have come up with a wish list of sorts. They are asking that GMAC return to leasing, approve some sub-prime loans and cut interest rates for loans to dealers to help finance their inventory. Also of concern is the fact that customers are increasingly upside down on their trade-ins. As a direct result, these consumers are having trouble getting approved because GMAC requires bigger down payments than it once did.

[Source: Automotive News, sub. req.]


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  • 23 Comments
      • 6 Years Ago
      Why would you loosen your purse strings when you need cash to collateralize your already bad debts? People want the banks to hedge their bad bets, not make more.
      bernie
      • 6 Years Ago
      My experience is that dealers often tend to exaggerate their problems. Even if business is good. If GMAC has lowered FICO scores why would they not approve loans based on these lower standards? If they were going to maintain their conservative posture why bother to announce to everyone that the minimum acceptable FICO scores had been reduced? Interestingly I see no mention in the article to any specific examples from these dealers where GMAC has not approved loans based on the new guidelines. That is likely because every painted fence has 2 sides and the story is just giving us a view of one of those sides.
      • 6 Years Ago
      We've tried several approaches, including financing with GMAC. Even with excellent credit and a practically spotless credit history, GMAC still hasn't allowed us to purchase a vehicle from our local dealership. The dealer has pushed the deal, but GMAC has dawdled maybe two weeks today without giving a straight answer. There's just flat out no answer.

      I'm sure we're not the only ones.
        • 6 Years Ago
        www.lendingtree.com

        If you've got the excellent credit and cash to put down, you should be able to get a loan through them, and hand the GM dealer a check.

        • 6 Years Ago
        Bingo.

        A few months back, my parents bought an '09 Malibu. They didn't finance with GMAC, instead they got a better rate with a local credit union which was done by the finance guy at the dealership.

        They have flawless credit, I used to be in the mortgage industry and have seen thousands of credit scores. I can honestly say that fewer than 5%(probably much less than that even) of people have credit in the 800's regardless of the numbers that people like to throw around. My parents happen to be two of those people. They'd have no problem getting financed by virtually anyone and GMAC just was not competitive.

        Personally, I think if the dealer is only using GMAC, they are losing out on alot of business.
      • 6 Years Ago
      Am I missing something? We're in this incredible financial crises because trillions of dollars were lent to people who should have never been extended credit. And now banks, GMAC et. al. are supposed to lend more money to these very same people for everything from cars to wide screen televisions. Does the insanity ever end?
        • 6 Years Ago
        Exactly. GMAC only cares about GMAC; for that matter, GMAC doesn't owe a whole lot to GM anymore. Besides, this is how the bailouts work - money gets dished out with lots of expectations and zero oversight that those expectations are met.
        • 6 Years Ago
        I don't think that is the issue. I think the issue is that GM dealers to dumb to realize that GMAC is owned by company that has NO REASON to subsidize loans, like GM did.

        This is how it will be going forward unless GM will get a new financing company. But you all can thank Wagoner for getting GMAC into sub prime.
        • 6 Years Ago
        You hit the nail on the head. Too many people are in too much debt. The appetite and the ability for being even more in debt is gone.

        Law makers and wall st. can't understand this simple fact.
        • 6 Years Ago
        sorry sir, but you are 100% misinformed, and couldn't be further from the truth.

        From the lending crisis, you had these things called ninja loans where it basically went like this: no income, check...no assets, check...no job...hey you're approved!

        Nowadays people that have decent credit, not super good, but decent credit aren't able to get approved for anything. These are the same people that would have been able to get a loan just fine even before the relaxed lending practices of the last 8 or so years.

        If you've heard anything about a "credit freeze" in the news, thats what they're referring to. Its not just people who can't get loans right now, its businesses and even other BANKS haven't been able to get loans from other banks at historically decent rates. Which is why the fed lowered the target federal funds rate to half a percentage point, effectively 0%. The UK i believe is doing the same thing.

        Anyways, thats what i know, but i couuuuuld be wrong.


        Anyways, i think its all quite stupid. The federal govt, after shelling out billions of dollars to the financial institutions noticed that after the told the banks to lend the money, they didn't. So their remedy to get GMAC to start lending, well...give them the same cold hard cash, w/ the same strings attached, and HOPE they would do something different. Obviously they didn't. Good thing the Bush administration is over, Hank Paulson is a gah'd damn crook. and the former SEC chairman, Chris Cox, is hasn't honestly been damn near criminally negligent.

        sorry bout the rant, but hopefully the new administration isn't as mentally unsound as the last.
        • 6 Years Ago
        Exactly. For some reason these dealerships expected everything to go back to the way they were (sticking their head in the ground). They still want some "sub prime loans"??? HA! And people are wanting help with upside down tradeins? HA!

        America has somewhat woken up to the blind lending over the past 10 years and it's time for the dealers and the auto industry to wake up!
        • 6 Years Ago
        The problem is that they overcompensated, and more or less stopped lending at all. Then the economy screeched to a halt, and we gave them tax dollars to start lending again. And instead of lending, they put the money in their bank accounts so they wouldn't have to do something hard, like fix their business model.

        To "get the economy moving again," lending needs to restart. I share your sentiment that as a people, we need to decrease our average indebtedness, but from a political perspective, politicians want you to spend your money, because you're less likely to notice how crappy things are if you just bought a new car.
      • 6 Years Ago
      WTF are the dealers thinking to go back to the previous lending habits??? WTF is everyone thinking to go back to the previous lending habits?? Sub prime loans should be an automatic denial...
      • 6 Years Ago
      If this is actually true, GMAC really is no better than the banks that also received bailout funds and haven't loosened their purse strings.
        • 6 Years Ago
        I think you hit the nail on the head. I would not expect GMAC to be any different. All of these financial 'institutions' are converting to holding banks so they can get some cheap money from Uncle Sam to either (a) hoard it; or (b) use it to buy another financial 'institution.'

        In the context of the 'bailout', I look at these banks like they are teenagers. If you give a teenager money and fail to provide clear instructions on what they are to use the money for, they will use it for any other purpose than what you had hoped...
      • 6 Years Ago
      Part of the problem with people being farther upside down is that the dealers are not giving anywhere close to fair trade in value on peoples cars. I tried to trade in my 07 Cobalt SS/SC, KBB and NADA valued it at 14,000 for fair trade, not excellent (which the car is flawless, and unmodded.) The dealerships around my area are selling them in near identical condition to mine for 17-18,000. Every dealership I've gone to has only offered me 9,500 to 10,000 at most. Which takes me from being positive on my car to pretty far negative.
        • 6 Years Ago
        I've seen them offered for 17k, I'm sure they would sell for less. I guess it just gets me that they have the audacity to have one sitting in the lot with 17k on the window then offer me 9.5k for mine which is better condition. I don't expect full retail for my car, but I would appreciate being offered closer to at least fair trade value.
        • 6 Years Ago
        $10,000 is around what they expect the car to bring if it goes to auction. Auction prices are way down. It's the dealer just trying to protect themselves.

        NADA prices are only useful IF dealers are moving cars. They're not.
        • 6 Years Ago
        Out of curiosity, are they *selling* them at 17K, or *offering* them at that price. I personally figured that I would get next to nothing for trades (that are also not selling) if I wanted to take advantage of the current fire sales. I also figure that the gap between trade value and selling price is larger these days since they will probably have to hold the car longer before selling it.

        D.
      mbutchcom
      • 6 Years Ago
      I have had my Chevy store sold for 4 months,GM approved the sale and GMAC will not give the guy new car flooring. They say it might be another 4 to 5 months before they are ready to floor them.WHATS UP WITH THESE GUYS! Here is a dealer that is selling cars and made a propfit in December and is willing to put up his house and deposit money in GMAC just to get new car flooring he floors his own used car, and yes he has great credit and has been in the car biz for 40 years.What is going on?
      • 6 Years Ago
      Two words:

      Credit Union.

      Join one, they have better rates, at least here in my neck o' the woods.

      And if you are upside down in your loan and your car still works well, why are you trying to get a new car?
        • 6 Years Ago
        @Snix,

        I just compared the in house GMAC financing APR to what my credit union lists on their website. GMAC 5.9% for 48 months, credit union 4.79% for 48 months, supporting your claim. Though I have to admit I have no idea how easy or hard it is to get approved for a loan by your credit union, having never done it.
      • 6 Years Ago
      This is a good thing! GMAC should be cutting back, they took way to much risk and got in trouble. Sounds like their customers haven't learned their lesson though (still coming in upside down on loans). In this economic environment, unless your vehicle is simply unable to be repaired to enable you to get to work, you don't NEED a new vehicle.
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