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GM campaign tells buyers they can still get loans By TOM KRISHER, AP Auto Writer
Wed Oct 15, 7:48 PM ET



With October auto sales expected to fall short of September's 15-year low, General Motors Corp. is launching a campaign this week to reach people who have stopped looking for cars out of fear that they can't get a loan.

Many banks and finance companies, including GM's own GMAC Financial Services, have tightened credit standards because they can't borrow money to lend, or they're reluctant to lend and risk defaults. "But that doesn't necessarily mean you can't get a car loan if you want to get a car loan," GM spokesman John McDonald said. "We just want consumers to know that you have options that you may not be aware of."

GM will promote its financing options with radio, newspaper and digital advertising from Friday through Nov. 3. The program, called "Financing that Fits," will publicize a 6-year-old computer database that lets dealers locate banks, credit unions and other lenders willing to make loans based on a particular buyer's credit information.

GMAC said Monday it would only make auto loans to people with credit scores of 700 or above. That, coupled with numerous news stories about people getting turned down for car loans, has kept customers away from showrooms, according to industry analysts.

Several analysts are projecting October U.S. sales to be lower than in September, when automakers sold fewer than 1 million vehicles for the first time in 15 years. Some dealers have reported losing 20 percent of their sales as buyers get turned down for loans after agreeing to purchase vehicles.

"I think the industry has been so paralyzed by the mistaken impression by the public that they can't get an auto loan that they have to go to pretty drastic measures to counter that," said Jack Nerad, executive market analyst for Kelley Blue Book.

GM, analysts say, has to fight the overall impression that there's no credit, plus tighter credit standards from GMAC. GM sold 51 percent of GMAC to Cerberus Capital Management LP in 2006 but still owns the rest.

"They can't really rely on GMAC any more," said Rebecca Lindland, an auto industry analyst with the consulting company Global Insight. "That's where the dealer has to be able to step up and get local financing, using their local contacts."

GMAC appears to be abandoning dealers and getting out of the auto loan business altogether, said John Clark, president of Avenue Chevrolet in Batavia, Ill., a Chicago suburb.

"In the past, GMAC was there rain or shine. As of now, I don't feel that way. I feel that they may not be around because they can't borrow," he said.

Clark said he's upset that GMAC strayed from auto loans into mortgages that have defaulted, leading to its current financial problems.

GMAC spokeswoman Gina Proia said the auto loan changes it has made "are related to the current market environment, which has reduced access to funds and increased the cost of funds."

GMAC as well as the "captive" finance arms of Ford Motor Co. and Chrysler LLC, face major hurdles because of the credit market downturn, and those problems are unlikely to end this year, according to a report issued Wednesday by the Standard & Poor's ratings service.

The finance arms have limited funding options, the market for loans bundled and resold as securities is frozen, loan losses are rising, and used vehicle values are declining, restricting their ability to support their parent companies' sales, Standard & Poor's credit analyst Ernie Napier wrote in a note to investors.

"As worries about an economic slowdown rise, captives are tightening their underwriting standards, building and preserving liquidity, adjusting contracted residual values on returned vehicles to ensure profitable resales, and lowering overhead costs," Napier wrote.

Ford took the unusual step of sending a letter to dealers Wednesday reassuring them that its credit arm, Ford Motor Credit Co., will keep lending and hasn't raised requirements to qualify for a loan.

"Many companies providing automotive lending have recently decided to exit this market or reduce their exposure by tightening their purchase policies," Ford said in the letter. "These actions by others may be unnerving, but Ford Credit is here for you."

Clark said he's happy GM is publicizing the computer database but said dealers have been helping buyers check multiple financing sources for years.

He's hoping the campaign will bring more customers, but said his business is off 60 to 70 percent from September, which wasn't a stellar month for him.

Clark said he's been able to get financing for people with lower credit scores, around 630, if they have a good work history. Those below that have more difficulty or can't get loans, he said.

"Money is out there to lend if you have very good credit, and in some cases if you don't have ideal credit," Lindland said. "It's trying to find those places that you can still get money from that will still lend to you, and that's the difficult part."

Those with lower credit scores have always had to pay higher interest rates, and that hasn't changed, Lindland said. The median FICO score is 720 on a scale that ranges from 300 to 850, according to Fair Isaac Corp.

GM isn't the only automaker trying to publicize that loans are available. Ford Motor Co. has said its lending arm is still making loans and leases, and Toyota Motor Corp.'s finance arm is offering zero percent loans on most of its model lineup.

GM also has zero percent financing available on some 2008 models, McDonald said, but it's also offering $6,000 cash back on all remaining 2008s.



Copyright © 2008 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.


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This is one thing I hate about GM's marketing. They go balls-out promoting this kind of stuff, Memorial Day sales, Employee Pricing, etc., but advertising for actual product is left, more or less, to word of mouth. What idiocy!
 

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The economy's headed for a recession, the credit market is [appropriately] tightening, unemployment is rising, some people are suggesting that car loans constitute the next "bubble" to burst, and many people are upside on their car loans. The solution: why go out and buy a car, of course! I'd say for people comfortably employed and who have good credit, they'd make sense. For people with less than stellar credit, it comes across as short-term gain for long-term pain.
 

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OK, F and I guys and gals,

What percentage of your customers have a credit score 700 and above?
If I read the article correctly, Fair Isaac Corp suggests the median FICO score is 720. That would suggest that at least 50% of buyers have a FICO score of 700 or above. Another article on GMI seems to suggest that 25% of buyers would have a problem securing credit to purchase a new vehicle from GM. Then again, is someone who falls in that range someone you want to be buying a new car?
 

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Discussion Starter · #8 ·
another issue is that when it comes to fico scores, there are different scores for car credit as opposed to a homebuyer or credit card score. in our bpg store, most of the folks coming here are 650-750. there are plenty of banks out there that will still lend to mid 600s score.
 

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This is one thing I hate about GM's marketing. They go balls-out promoting this kind of stuff, Memorial Day sales, Employee Pricing, etc., but advertising for actual product is left, more or less, to word of mouth. What idiocy!
Agreed 100%

Please GM........get your head out of your butt and start thinking clearly. It's not too late.
 

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I do, too. It's not hard to achieve, either. Just pay your bills on time. That's all it takes.
Even that, just pay minimum and you will have 700 score. Its really not that difficult unless you are buying more than you can afford, which most people are doing these days. Why should companies suffer for these people?
 

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That is not true at all. I worked in mortgage lending for 7 years, and got out in 2005. As I explained in the other thread, I have dealt with MANY, MANY people, who have perfect credit...............we are talking long credit histories, no derogatories, no collections, perfect home and auto loan histories, and few credit cards............... who have low 600 scores.

It is hocus pocus to get a good score. The odds are against you, as the formula is a complete secret, and is set up to allow lenders to charge higher rates for more customers.

A person can have 100K in available credit card credit, of which 20% is being utilized.......... or $20K. Another person may not believe in credit cards, pays cash for most of his purchases, and only has one card with a $3000 limit, of which he owes $2000 on. All else being equal, person 1 could easily have an over 700 FICO, and person 2 may have a low 600 score.

Go tell the guy who doesn't believe in credit cards, that he is a deadbeat, does not handle his money responsibly, and does not deserve a car loan.

BTW, your FICO score has NOTHING to do with your job, or your income, or your stability. It is a game, and a scam.......... and it was originally sold to the lending industry as a predictor of BK risk. That was BS............ it was, and still is, all about the money.

When 80% of credit reports have errors on them, how can anyone look at a fictional number, like a FICO score, and think that it has any merit what-so-ever. Conclusions based on flawed facts are fairy tales.

Sorry, but credit scores are a BIG pet peeve of mine, and part of the reason I got out of lending (I was the poor loan officer who actually helped people, but slept good at night).
 

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this is one really screwed up company.
 
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