GMAC Restricts Financing To Credit Scores Over 700

The credit crunch has already been affecting  the automotive market for months, but now there is concrete evidence of exactly how bad it is. GMAC, the financing arm partly owned by GM, is restricting consumer auto financing to those with a credit score of 700 or above. Those are consumers who are considered to have very good credit.

They’re also looking to limit contracts with longer terms, like no longer than 72-month plans.

GMAC directly blames the credit market for the change, “These changes in pricing and underwriting are related to the current market environment, which has reduced access to funds and increased the cost of funds. The company currently expects these actions to remain in place until the credit markets stabilize and accessibility improves.”

Related
Credit Crunch Hitting Car Dealers (KickingTires)
How Wall Street's Woes Affect Car Shoppers (KickingTires)

Comments

I love the fact that they are rewarding people who are fiscally responsible. But, I think they should consider lowering the threshold to somewhere around 650. But, then again, I'm not a banker.

I think people with a credit score at 700 or above probably are not considering a GM vehicle...LOL! I bet most GM employees could not even get financed on the vehicles they are building...way to poop on the little guy GM!

Most people with credit score of 700+ - actually, make it almost ALL people with that level - are extremely financial responsible toward their own situation. They don't spend $$$ without careful consideration, and they weight in their options - such as should I buy a new car? Should I put the money in some money funds or children education funds instead? That's why they have such good credit. Logics have told me that these are the breed that spend only when they need to, not when they "just" want to.

Car companies do NOT make money from people with such high credit score. They make money from those who CAN'T afford to buy new, or people who don't think logically toward any purchase. Car companies prey on the "emotional" ones...and unfortunately, these are the ones that usually don't have good credit score because they spent $$$ emotionally and not logically (look @ our housing market today!).

Thus, this is a downward spiral - Financial companies tighten up credit scrore on lending > Car companies sell/lease fewer vehicles 'coz more people can't get loans > Less $ to both car/financial companies > Financial companies tighten up even more 'coz they have less $ and they don't want to lose $ on risky loans > Car companies sell even fewer vehicles > ...

Sounds familiar? Yup! That's the housing market + our current finanical turnmoil today in stock market, and is now affecting the auto industries on the surface.

This is a great idea as it will save people with lower credit scores from buying GM cars. Their cars don't hold value and are known to be of inferior quality. I really like this idea and am not surprised one bit that GM did this to themselves. Go w/ Honda, Subaru, Toyota, or Nissan and you will not be disappointed.

Tom - Not sure that your comment has anything to do with the article. Having said that, GM's problem isn't quality but, rather, perception of quality. Their quality matches or exceeds that of those you mentioned.

Well Nissan for sure doesn't have a sparkling quality reputation.

As for the story itself: it's just such an unusual move to highlight this fact in print, in a press release no less.

Yea I guess when your car breaks down or you have to bring it in to the dealer several times during the first year is a matter of perception. Give me a break.

look you cant compare a chevy traiblazer quality to a toyota higlander!!! sorry people want good quality out of there cars not being in a gm repair shop 24/7!!! i have seen more gm recalls than all japanese brands combined!!! look at the saturn vue !!!!its on your website!!!!

gv,
wait til the end of the year or the beginning of the year and you'll see a lot more recalls. Every brand has them. Some more severe than others. Go to our recall category and check them out
http://blogs.cars.com/kickingtires/recalls/

This has nothing to do with brand or quality. This has everything to do with banks shutting off marginally risky and high-risk people from loans that people shouldn't be making in the first place. There is a reason people's credit scores are low and that comes from fiscal irresponsibility. Had the banks and lending institutions done this in the first place then we wouldn't be in the mess we are in right now.

exactly ^^

acctually GM may make more money with people who ahve scores over 700...if they hand out the right deals, they'll be able to sell their new models well. in addition, people that have scores over 700 rarely buy luxury cars; they know they are the worst investments that anyone can make, opening the door for GM's upscale brands like Buick and GMC. also, people with a score of 700 or higher rarely, if ever, buy a car that is to expensive than they can afford. this means not extending a loan past 36 months.

if you cannot afford to pay off a car in 36 months, then you cannot afford the car.

GM is only doing the restriction on GMAC. You can still borrow from other banks.

JM,
Addition by subtraction does not work when the goal is to increase sales. You must have graduated from a public university.

GM products are low quality and everyone knows it but the sheep.

Hmmm, the sheep and oh maybe the 9.37 million customers who bought GM cars in the last year?

frank, perhaps jm is looking at quality. yes, one may sell 100 cars, but if the repo man brings back 20, that isn't good. perhaps is better to sell 85 and have repo man bring back 5.

Regardless of what one's credit score is no one in their right mind would buy a GM product. They make low quality cars and most people have figured that out. For the past week I've been driving a typical GM car, a Malibu rental. If this is GM's best they can do no wonder they are not selling. I can't wait to get my TL back from the body shop.

Are you driving current generation Malibu or last generation. Its easy to make the top level trim of any automaker look nice and unique. Most mainstream trims look the same.

elster,

As with most GM bashers you are totally ignorant of the facts. Malibu sales are up big time this year and last month it came within 3k units of the accord. Also, the Impala outsold the Accord and Altima last month. The Malibu is as good as any Accord inside and out and it looks far more upscale. Transaction prices for the 2008 Malibu were slightly higher than the Camry last time I checked. I would love to know where you heard the Malibu "was not selling". Why do import fanatics have to be so out of touch with the facts?

The fact that Elster believes that a $20k Malibu (which is a nice car for the price) represents the "best they can do" shows he is out of touch. GM makes vehicles that cost as much as $103k so the Malibu is hardly the best car in their lineup. What Elster should be noting is that his beloved Acura is struggling as much as any GM brand and the new TL isnt going to turn things around.

Sheth hit the nail on the head. I know someone who turned a new TL in, using the lemon law. I don't care what the manufacturer is, if you make thousands of cars, there will be some defects.

1/3 of malibu and impala sales are fleet sales.

Just shows that the masses are ignorant and blind. Heck, our government depends on it. Consumers have always bought blindly, thus the sheep comment earlier. Number of sales for anything are purely meaningless.

According to Rick Wagoner the Malibu is the best car that GM has ever produced (Google) and yet it's a colossal sales failure. According to the WSJ 33.7% of Malibu sales have been to Avis, Hertz and Enterprise. If you deduct the 33.7% to determine REAL sales to end consumers the numbers at the end of Sept 08 are: Honda Accord 313,228. Chevy Malibu 92,927. The Malibu is no competition. It's no wonder GM is talking merging with Ford and Chrysler.