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Source: Special Automotive News Email Alert

Jamie LaReau - Automotive News - October 31, 2008 - 12:54 pm ET

For the first time in years, General Motors is pulling the plug early on a certified used-car financing program, a GM spokesman confirmed today.

The company is doing so because of a lack of credit funding, said spokesman John McDonald.

GM had announced a financing incentive program through GMAC Financial Services that would start Oct. 1 and run through Jan. 5. The program offered 3.9 percent consumer loans for 60 months on all used models of the Chevrolet Impala and Pontiac G6 sedans and Chevrolet Silverado and GMC Sierra trucks. But on Oct. 17, GM sent a notice that it would end the program Nov. 3, McDonald said.

As a result, many GM dealers worry they won't be able to move the inventory they built with the understanding that the program would run through Jan. 5.

"It's a tough situation for everybody," McDonald said. "It really shows how pervasive the impact is for this credit crisis. If there's no money to do this stuff, there's no money to do this stuff."

McDonald said GM is studying future incentive programs. He said GM plans a different certified used-car incentive on Nov. 4, but he declined to give details.

"Obviously, the dealers are our customers," McDonald said. "We want them to be successful, but you can't get to the point where you're putting yourself in financial difficulty."

One GM dealer in suburban Detroit said the Impala, G6, Silverado and Sierra make up 50 percent of his GM used inventory. He called GM's move a "bait and switch."

"The market's going to fall on those cars because they're no longer a featured vehicle, and we bought them to supply them through the end of the year. Now what?" he asked.

At neighboring Springfield, Mo., dealership, Reliable Chevrolet, managers kept their used-vehicle inventory low, so they do not have a lot of these vehicles in stock. Still, one employee there, who asked not to be identified, said he has never seen GMAC cancel a program this early. He said he takes it as a sign of the severity of GM's financial situation.

"They haven't given us a clue as to what they were going to do," the employee said. "Anything GM does doesn't surprise me right now. I hate to say that. We're in a survival mode right now; everyone is."
 

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700 Beacon score or better. Will not finance over invoice.
These restrictions seem more like common sense than survival mode. When I bought my used Silverado when I graduated college, Bank of America would only give me what their book said it was worth. Going rate on the truck at the time was about $13k, I paid $11.5, and they would only give me $10k. I had to borrow a little money from family to pay the taxes on it but it wasn't a big deal. It was only a matter of time before the credit bubble burst... just like it did in 1929.
 

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I bought a Caprice from Reliable Chevrolet in Springfield back in the 80's. They were great to do business with and seem to have made the right inventory decisions according to the story.

It looks we are heading for a deflationary "cash and carry" car selling scheme over the next few months. It's starting to feel like the 1930's where the money just disappeared.
 

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This is good. Why put incentive on vehicles that do not sell. Why not just reduce inventory and produce less of them. This has been gm problem for years. They build so many in then they have to offer big incentives to sell them and then they lose money. Maybe this will force them to build only what market can take with no incentive.
 

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Last month, I bought 2 new vehicles in the same week. Nissan Xterra, and Sky Redline. The Nissan dealership did my deal thru Omni American Bank, and the Saturn dealership did my deal thru a local teachers credit union! When I left the dealerships, I didn't even know who was buying the paper, I only knew what interest rate we agreed to. 4.8 on the Xterra for 5 years, and 5.2 on the Sky for 6 years.
 

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These restrictions seem more like common sense than survival mode. When I bought my used Silverado when I graduated college, Bank of America would only give me what their book said it was worth. Going rate on the truck at the time was about $13k, I paid $11.5, and they would only give me $10k. I had to borrow a little money from family to pay the taxes on it but it wasn't a big deal. It was only a matter of time before the credit bubble burst... just like it did in 1929.
GMAC didn't restrict lending to the 700+ people because they are suddenly afraid to lend to somebody with, say, 670 score. The reason GMAC is limiting lending is because they are broke, you can't lend the money you don't have. IIRC GM is actually offering a $250 rebate if you finance with anyone but GMAC.
 

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Incredibly short-sighted that GM would cede control of GMAC financing to an outside firm - granted GMAC was poorly run and had even worse accounting practices, but GM appears to really need GMAC now. GM also was, in hindsight, totally negligent in allowing itself to go into mortgages - something that Ford Motor Credit doesn't have to worry about.

.....the chickens are coming home......to roost!
 

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Last month, I bought 2 new vehicles in the same week. Nissan Xterra, and Sky Redline. The Nissan dealership did my deal thru Omni American Bank, and the Saturn dealership did my deal thru a local teachers credit union! When I left the dealerships, I didn't even know who was buying the paper, I only knew what interest rate we agreed to. 4.8 on the Xterra for 5 years, and 5.2 on the Sky for 6 years.
Same here, purchased a CTS and the financing was done through some never heard of bank. I got the promised rate so I don't really care where my payment is going.
 

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I bought a Caprice from Reliable Chevrolet in Springfield back in the 80's. They were great to do business with and seem to have made the right inventory decisions according to the story.

It looks we are heading for a deflationary "cash and carry" car selling scheme over the next few months. It's starting to feel like the 1930's where the money just disappeared.
There are still plenty of financing options, not every bank is as broke as the GMAC.
 

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glad i got my deal done when i did. caught the 2.9% while it lasted..... this is an awful sign, and a definite blow to an industry that doesn't need it, and an even worse shot to a company already in turmoil. i hope this crap turns around really soon.
 

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Everyone should have to put down 20% to finance anything, be it a car or a house. If that was the case we wouldn't be in this mess in the first place.

"I see you want to buy a 14,000 car, here, we'll give you $20,000" It should have never been like that.
 

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Everyone should have to put down 20% to finance anything, be it a car or a house. If that was the case we wouldn't be in this mess in the first place.

"I see you want to buy a 14,000 car, here, we'll give you $20,000" It should have never been like that.
i agree. plus they should make you put 30% down for trucks and suv's since they are high risk. If fuel price go up their resale value drops and people stop paying them. you want 30k truck well put 9k down. SImple as that. That will keep you from returning that vehicle to the bank and even if you do bank will not lose anything.
 
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