Consumer Car Buying Advice Blog

Latest move by GM finance arm should help those with less than perfect credit.

A welcome move

Yesterday’s move by GM’s captive finance company is seen by everyone here at Auto Credit Express as a move that is both welcome and, quite frankly, way past due. In recent months, borrowers with less than perfect credit have been hard hit by the double whammy of a financial crisis as well as the drop in home values coupled with the high rate of home foreclosures.

The financial crisis has led to a lack of funding for auto loans to all but the most qualified buyers, pushing aside an ever-growing population of consumers who, through job loss or other circumstances beyond their control, have seen their credit scores drop. The precipitous drop in home values has, for many home owners, eliminated another source of vehicle financing – the equity loan.

When you combine these two elements with an uncertain job market, you have the perfect witches’ brew of eroding consumer confidence and falling auto sales.

What it means for bad credit auto loan borrowers

With the announcement yesterday that it would again look at buyers with a FICO score below 620, GMAC put itself squarely back in the auto finance game – something it had been both unwilling and, in many cases, unable to do since October of 2008, when it announced that it would no longer lend to customers with a credit score of less than 720.

In announcing the change, GMAC was quick to point out that customers with low credit scores would still have to qualify for loans (meaning income, job and residency requirements), but that the move “will expand the credit available to a broader spectrum of buyers.”

In addition to expanding its base of borrowers, the lender is also eliminating the payments dealers have to make each month to cover aging inventory – thus giving dealers an increased cash flow while at the same time waiving the fee they normally charge to dealers to post aging vehicles on their online auction site to help them reduce their inventories.

The Bottom Line

According to GMAC President Bill Muir, “GMAC has funding available to stimulate auto sales. We want to do our part to support both the U.S. auto industry and individuals in the market for a car or truck.”

It also means that many bad credit customers now have, for the first time in many months, a real shot at getting financed for a vehicle at a General Motors dealer.

Tags: ford, new car employee discount

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