vote nowBuzz up! It’s Getting Easier to Get a Car Loan

Auto loan giant GMAC has lowered its credit standards, offering car loans to subprime buyers in an attempt to loosen a tight credit market that has helped push auto sales near record lows. The Detroit News reports, “GMAC said it is earmarking $5 billion in the next two months as part of its effort to lure more consumers into the crippled car market…The auto and home mortgage finance company said it will accept auto loan applications for customers with credit bureau scores under 620, which is considered subprime.”

Kicking Tires reports, “GM expects the move to increase the number of potential car buyers by 30%-35% for GM dealers who finance through GMAC – that’s about 70% of all GM dealers. The company said dealers would still use discretion in deciding to whom they will give loans, taking into account factors like job status and applicants’ financial records.”

The move comes at a time when General Motors – which still owns and operates a portion of GMAC – has only 60 days to prove to the Obama administration that it can recover from its current financial struggles, or face the withdrawal of federal aid and certain bankruptcy. Autoblog comments, “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.”

The company is also trying to make things easier on car dealers. Dealers often don’t own the cars on their lots – they finance them through so-called “floorplan loans” offered by large lenders like GMAC. The payments dealers make on a car tend to rise the longer the car goes unsold, meaning that, in a slow market like this one, dealers’ costs rise as their sales slump. According to the Detroit Free Press reports, GMAC is attempting to offer a lifeline to struggling dealers by “eliminating dealer curtailment payments — which required dealers to pay a portion of a wholesale loan on vehicles that have sat on their lots for an extended period — during April. The financing company is also allowing qualified dealers to defer wholesale interest charges for two 30-day periods in the next four months.”

If you’re in the market for a new car, check out the U.S. News rankings of this year’s best cars as well as this month’s best car deals.

~ by bestbooter on April 4, 2009.

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