GMAC resumes subprime lending
GMAC has loosened the purse strings, with General Motors' finance arm allocating $6 billion for auto loans for the next 60 days. The 60 day mark is critical to GM, as it is the government's drop-dead date to satisfy Auto Task Force viability requirements. The cash infusion will help struggling dealers with dried up credit channels, but it will also be used to finance cars and trucks to people with credit scores under 620. The under 620 crowd is referred to as subprime, a term that is now synonymous with the words "bailout" and "recession."
Back in October, GMAC restricted lending to customers with scores over 700, and when the U.S. government provided a $6 billion in loans, the minimum score was lowered to 620. GMAC insists that the under 620 score would be approved sparingly, and buyers would still be required to qualify for financing. NADA chairman John McEleney says that the lowered credit score minimum could result in the ability to help 30-35% more Americans get into a new car or truck. And while overplaying the subprime card can lead to more trouble, at this point, the General clearly has to do something to get metal moving again.
[Source: Automotive News subs req'd | Image: Joe Raedle/Getty]
Reader Comments (Page 1 of 3)
why not the LS2LS7? 4:27PM (4/02/2009)
I thought GMAC was more owned by Cerberus than GM now?
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gerrrg 8:34PM (4/02/2009)
Really? I thought that was Chrysler?
Alex 4:28PM (4/02/2009)
So basically GM needs to move more vehicles to appear viable to the US Government to recive more funding. To do that they are going to sell cars to people who are statistically likely to default on the loan that GMAC approves. I see where this is going...
The end result being a continuation of the problem that got us here in the first place.
BRILLIANT!
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Aprime 5:03PM (4/02/2009)
lolgovernment.
henrykrinkle 5:47PM (4/02/2009)
The boat's sinking so just drill a hole to let the water out!
Jake B 6:15PM (4/02/2009)
I wish there were captions.
She says," But Bankruptcy is in my horizon."
Salesman says," That's okay, Bankruptcy is in our future too! Sign here!"
Matt 8:33AM (4/04/2009)
@ Autoblog
Please update that picture with Jake's caption
BoxerFanatic 4:31PM (4/02/2009)
This looks like it is going in circles faster and faster.
Like swirling the drain.
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Wobbly_ears 4:34PM (4/02/2009)
Haven't these financial geniuses learnt ANYTHING?? These subprime borrowers have a low rating for a reason. If your score is in subprime range, get a USED car, make more money & get your score up. Pay your debts down, live frugally & when you're on a good financial standing & have saved up money, THEN think about buying a new car. For the moment, you can drive a used beater & still be able to drive.
And to think that GMAC just got money from taxpayers & are again playing the very same games.
Cerebreus (GMAC's greedy owners) should be charged with misappropriation of public money.
I am STEAMING right now with anger. Are the citizens & government blind??
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alex 5:06PM (4/02/2009)
You CAN loan to people with bad credit responsibly. you just require a MUCH higher % down payment, make sure they have adequate collateral and have higher interest rates.
the subprime loans that got the whole market in a tailspin were ridiculous. they were giving home loans to people with bad credit and requiring 0%, 1% or 5% down! that's just stupid and there is no indication that GMAC is trying to replicate this.
Wobbly_ears 5:22PM (4/02/2009)
There are 3 kinds of people who might have a sub prime rate.
1. Youg people who haven't had a credit history long.
2. People with too much debt.
3. People with poor credit record. (Bankruptcy etc.)
None of these people need to take on an additional debt of 15-20k. One can find a reliable car for 3k-5k easily. The excuse that everyone needs a brand spanking new car is ridiculous. People with such low credit score need to sacrifice pride & live frugally & try to pay off all their obligations responsibly. Taking on an additional debt is inexcusable, if you ask me.
As for GMAC, I think this is criminal & unethical. I wouldn't have cared if they hadn't come begging to the taxpayer for their shoddy & greedy decision making.
Do Americans have really that little short memory??
tony 5:57PM (4/02/2009)
You are partly correct but also partly wrong. I guess you havent heard abt the collapse of the housing market? There are millions of people who got severely affected by the nightmare of the housing crisis. More than half of those were not irresponsible. Can you justify paying $3k mortgage when ur neighbor who just baught their house is paying $1500? Alot of those went to foreclosure as a way to escape the bust of the housing market, BUT, they are not irresponsible creditors. I am talking by experience. You people are sometimes so cold and clueless. There are alot of people who can afford to pay for a new car but they are not given the chance because their credit was ruined by the foreclosure. And i am sure that if not for the housing market gone really bad these people would still have better FICO score than you.
Wobbly_ears 6:08PM (4/02/2009)
Tony,
So, the fact that your neighbor pays 1500 while you pay 3000 makes you want to put your home on foreclosure?? And that doesn't make you a risky borrower? What is the guarantee that you won't abandon your car when you find out that your coworker pays $100 less than you? When you take a credit, you have an obligation to fulfil your part of the bargain - you pay down your debt.
As for housing crisis: People who bought more house than they could afford or who signed onto ARM blindly get no sympathy from me. Now, if they lost their homes because of unemployment, can't they buy a cheaper car rather than buying 2-25k car on debt?
And you're accusing me of being cold?? Sir, I have a credit score of 800+ but I rent an apartment! My wife & I don't live on credit cards & we save ferociously. Consequently, we don't have 65" HDTV or have taken expensive vacations. We have been responsible with our finances but we're being asked to pay for the mistakes of others.
Nellydesign 7:06PM (4/02/2009)
Make more money to get your score up?? Do you even know how credit works? Making more money may help a bit but bad credit is a black eye that doesn't go away easily. At least not as easily as just "making more money" which is hard in and of itself. One way to improve your credit is to get a car loan and pay on it religiously. Don't get me wrong, I abhor people who spend themselves into massive debt, but there are people out there who can afford a car but just can't get a loan right now due to the crunch. Anyway, I don't think banks are buying up CAR LOAN backed securities. If this was mortgage lending that would be one thing but let people buy cars already! Then maybe the auto companies wouldn't need to ask for money. (And they are all asking their respective governments, even Toyota)
Chad 4:20PM (4/03/2009)
Wobbly_ears said
"Pay your debts down, live frugally & when you're on a good financial standing & have saved up money, THEN think about buying a new car."
But . . . but . . . that would require patience and rational thinking : )
Luis 4:34PM (4/02/2009)
It's time to flush the toilet. Now GM is just trying to create more toxicity before they file for Chapter 11.
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John Johnson 4:35PM (4/02/2009)
I love credit fixing problems that credit caused. Oh, this is good.
*grabs popcorn*
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izorro 4:38PM (4/02/2009)
*facepalm :|
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Jubei 4:43PM (4/02/2009)
Nothing has changed. Same GM, same quality issues.
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Zeus.:God 6:02PM (4/02/2009)
What, quality issues, Jubei? They're no worse than any other car company out there, domestic or foreign.
You really do need to stay out of Autoblog. We have enough trolls here as it is.