UPDATE:GMAC Eases Dealer Finance Charges,Expands Retail Credit
01 April 2009 - 5:09PM
Dow Jones News
GMAC LLC, the financing arm of General Motors Corp. (GM), said
it will ease wholesale finance charges for dealers and make at
least $5 billion available for consumer auto loans in the next two
months to boost vehicle sales.
The moves are aimed at alleviating the pressures facing
cash-strapped auto dealers and boosting sagging sales in efforts to
clear bloated stockpiles of new vehicles.
"Every available option in credit is important to some dealer,"
Paul Taylor, chief economist at the National Automobile Dealers
Association, said.
But in addition, "sales rate absolutely has to pick up. That's
the most critical issue for dealers," he said.
GMAC has traditionally provided the bulk of funding to GM's
dealers and retail buyers.
"Dealers have told us that cash flow is critical right now,"
GMAC President Bill Muir said. "We want to do everything possible
to help dealers sell their inventory of cars and trucks, while
preserving their working capital during the next couple of
months."
GMAC's latest offer comes a day after GM - along with rival Ford
Motor Co. (F) - announced incentives that go beyond traditional
cash rebates and financing deals, in an effort to jump-start sales
that have plunged amid the credit crisis, housing slump and
recession.
GM, through April, is offering payment protection for the first
24 months of ownership. For buyers who lose their income, the
company will make up to nine months' worth of payments for up to
$500 a month.
For retail customers, GMAC said Wednesday it will reduce rates
for new and used vehicle financing; increase allowable advance
rates for financing terms of 60 months or less; and accept
automotive finance applications for customers with credit bureau
scores below 620. The median U.S. consumer credit score is 723.
For dealers, GMAC said it will eliminate dealer curtailment
payments on aging inventory during April. Curtailment - a standard
auto-industry practice - requires a portion of a wholesale loan to
be repaid after a vehicle has been in inventory for an extended
period.
GMAC also will waive the fee for dealers to post aged vehicles
on SmartAuction, GMAC's leading online remarketing site, through
June to reduce inventory and minimize future curtailment billings.
The financial arm also will allow qualified dealers the option to
defer wholesale interest charges for two 30-day periods during the
next 120 days.
GM sold 51% of GMAC to private equity firm Cerberus Capital
Management in 2006.
-By Aparajita Saha-Bubna and Mike Barris, Dow Jones Newswires;
617-654-6729; aparajita.saha-bubna@dowjones.com