• May 18, 2010
In a word, yes. The Detroit News reports that General Motors is looking to find a way to tap into the subprime lending market that accounts for 16 percent of the overall car-buying market. There is, after all, plenty of pressure to sell more vehicles to enhance the company's value leading up to its initial stock sale. But while GM would like to strategically go after subprime borrowers, there is one significant roadblock in the way; Ally Financial. The financing firm, which was GMAC until The General sold off its captive finance arm prior to bankruptcy, apparently isn't willing to endeavor into risky loans. Ally, like The General, is owned in part by the federal government, with government cash in its coffers.

Top GM North America executive Mark Reuss reportedly told the Motor City newspaper that the automaker wants to have more autonomy over whom it lends money to, and it's all about moving more metal. Reuss points out the fact that 20 percent of Honda's new car sales are currently to subprime borrowers, adding "it would sure help my sales, the company's sales in North America, if we were able to get access."

If GM were to wrestle back a controlling interest in Ally, the company that could be most concerned with the result could be Chrysler. The Pentastar also depends upon Ally for vehicle financing, and CEO Sergio Marchionne points out that "if they control the lending practices and the degree of penetration and support that they gave to Chrysler, that would make us very, very concerned."

At this point, Reuss claims that GM hasn't yet asked Ally to expand subprime loans, so there is a chance that the two companies will be able to reach an agreement without GM getting back into the loan business.

[Source: The Detroit News | Image: Mark Ralston/AFP/Getty]


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  • 48 Comments
      lorraine farrell
      • 4 Years Ago
      Great if GM was more responsible after being a die heart cust. gm did a big error first they sold the camaro as a great muscle car that could spin tires and race a st. track than the shaft on he trans, breaks but they look for any little thing not to stand behind it . the warrantee your probably better off w/ the mustang ford stands behind the mustangs power, be careful not to put any extra race parts on the camaro it will void your entire warrantee
      • 4 Years Ago
      Subprime lending isn't a stupid idea, but it's one that requires saavy lenders. The idea is that you lend money to a large amount of people who normally wouldn't get a loan BUT you hand pick these people carefully to make sure that MOST of them will pay the loan.

      How do you make a crapload of money doing this? Real simple. You set high interest fees and ALWAYS repo the car the minute the person doesn't pay. That way you rinse and repeat with the same car until someone pays their bills.

      It's quite clever really.

      The reason why it didn't work with morgages is that the lenders got so overzealous that they started lending too much money to anyone with a pulse. There's a huge world of difference between lending money to someone who may not pay and to someone who either cannot or will not pay.
        • 4 Years Ago
        What the other Dan said is truth. Ive seen it working for a Credit Union where I was a loan officer and now that Im now a Personal Financial Planner with a CFP. Although now very few people with Credit Issues come to me. But I would advise anyone who has credit score issues (mostly due to job loss) start low and work their way up. There is absolutely no reason to get into a new car unless you have a need and have a large amount of cash to throw down on it.
      • 4 Years Ago
      I love it how you guys chose a picture with a bunch of Cadillacs to talk about subprime.
      Would you have done the same for Toyota? Would you have shown a bunch of Lexus?

      I doubt it.
        • 4 Years Ago
        And your stereotype would be based on stupid. A $54,000 Cadillac is just as unlikely to be sold to a subprime applicant as a $54,000 Lexus or $54,000 Mercedes or $54,000 BMW.

        Do you see the common element in the above example? Have I explained it plainly enough for you to follow?
        • 4 Years Ago
        in beverly hills no less
        • 4 Years Ago
        We have stereotypes for a reason.

      • 4 Years Ago
      Sub-prime loans are a bad idea. Consumers need to learn: If you can't afford it, don't buy it!
        • 4 Years Ago
        That is actually a misconception due to the TYPES of subprime loans given during the height of Casino Capitalism. If someone has bad credit - for whatever reason - they may choose to get a subprime loan to start rebuilding the poor credit. IOW, that person can afford the extra expense.

        Whereas the frenzied loaning (and bets on those loans) that crushed the country was for subprimes on objects the lendees could not afford (like houses 5x their income). These were loans placed on the gamble of 'flipping' to the next idiot for more money.

        So subprime is not an issue IF the risk is mitigated. If it is wide open like the past then it is stupid.
      • 4 Years Ago
      Based on the crowd I've seen driving the Malibu, Impala, G6, and the like, I thought GM was already catering to the sub prime car market.
      • 4 Years Ago
      This is exactly the greed that's caused our economy to go in the toilet in the first place. Yeah, it would be great to move more metal; but this will be a relatively short term fix for boosting sales. Once the banks start sub-prime lending and then start getting burned, you're going to see them tighten up again, just like they've done this past year.
      Let's just start the cycle all over again.
      • 4 Years Ago
      Subprime car loans already happen. GM just wants in on it. Subprime car loans are much, much different VS subprime mortgage loans (like the fact you can repo it very quickly, assuming you can find it, etc) No foreclosure process, just take it back.

      GM wants to make money. Go get em! Subprime should just require lots more down payment. If you are subprime, but happen to have say 10, 20, or 30 % down, why shouldn't you get a car loan. Plus, define subprime? Limited credit? Bad credit?
      • 4 Years Ago
      I don't see an issues selling to sub-prime customer, I was once considered sub-prime customer due to my limited credit history and one bad credit card that I received while still a teenager. In fact my mortgage for my condo was financed sub-prime and I have never missed a payment on mortgage, credit cards and car loans. Although my credit score is now well into the 700’s and I can demand low interest rates, I understand that we all have to start from somewhere.
      • 4 Years Ago
      The cycle will go on and on until everything busts for good. One of America's problems is debt. Everything revolves around it. From a business stand point I can understand some debt to raise capital to continue to open new operations to create more profits for shareholders. But looking at personal debt, it does not raise any capital unless it is something like a student loan. We got in trouble when we lend to people that had to barrow through "subprime" lenders and when the economy started to drop most of these people were the first to feel the impact, many being in jobs that are easily replaceable and the first to get laid off. Now, how are we trying to fix the rut we are currently in? By lending to people that are uber risky causing the same affect that happened 2 years ago, causing the government to bail out more people (now that it is expectable) getting the treasury to barrow and create more money and ultimately destroying America's financial system. These are things that will be coming. History repeats itself and the more we stay on this, everyone needs this new stuff we are going to fall like Rome.
      • 4 Years Ago
      GM should say bye-bye to Ally and restore GMAC to its rightful place in the company. Sorry, Sergio. Looks like you should follow suit also. However, both companies should avoid anything to do with real estate as they are woefully inadequately endowed for such endeavors.

      And as for the Cadillac/Saab dealership in Beverly Hills!!! What an eyesore that is! The cars on the lot look like left over rejects from a by-gone era. Gotta love the $399 per month Walmart sticker on the first unit...Sooo, classy! NOT.
      And a truck is the premier drawing to the dealership...What are they thinking? Sure, Escalades make good profits, but you turn off anyone who is seriously looking for, let's say, a Cadillac CTS-V or better.
      Furthermore, the building itself lacks any pizazz befitting the clientele that frequent that part of LA County. Where is all the glitz and glamour?
      I suppose the salespersons' still wear black and white checkered sport coats as well.
      This dealership needs to be revamped so that it stops attracting the Lindsey Lohan's who are in dire need of rehabilitation.
      • 4 Years Ago
      Hey how about this for a concept: If you cannot afford a car, you shouldnt buy one. Crazy I know right...
      • 4 Years Ago
      16% of ALL auto loans are subprime, that should be the real story here. Every brand does it so what's the point? Must be a slow news day at AutoBlog.
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