GMAC Cuts Auto Loans And Leases

November 14, 2008

GMAC Financial Services has announced its plans to tighten its lending standards in Europe. This would make it more difficult for some consumers to get loans to buy cars and trucks.

As soon as November, GMAC, General Motors’ financial agency will halt its auto loan and leasing programs in about seven European countries. This latest measure comes just after GMAC revised its lending standards in the United States.

This restriction in lending is being created by a combination of financial losses suffered by the financing agency. Efforts to reinforce its dwindling capital in the wake of low funding have further weakened GMAC at home and abroad. The credit crisis is having a serious effect on already poor sales of new autos. Fewer borrowers have access to money. Figures for October and November are expected to reach 17-year lows according to car-buyer site, Edmunds.com.

GMAC spokeswoman, Gina Proia states that, “These are actions we didn’t take lightly but, due to constrained access to funding, we’ve taken steps to better align operations with available funding sources.”

Proia further stated, “We’re taking measures to manage capital and funding resources in the face of extremely difficult market conditions.”

GMAC has also been forced to raise the rates that it charges for loans to European dealers. The new rates are to take effect on the first of November. For US borrowers, GMAC policies started shifting at the beginning of October.

First, lending standards were tightened so only those consumers with 700+ credit scores would be eligible for financing. Additionally, long-term loans, meaning those of sixty months or longer, would cease. High down payments would also be required from borrowers.

The growing credit crunch has prompted GMAC and other finance companies raise the rates and associated fees on dealerships operating with weak finances. This, in turn, will affect the costs that dealers must pay for new vehicles. Dealer inventories will become leaner and buyers will have fewer options than before.