Saturday, July 28, 2012

GM: Government Motors Selling Sub-Prime Auto Loans

David Horberg - President Obama has touted General Motors (GM) as a successful example of his administration's policies. Yet GM's recovery is built, at least in part, on the increasing use of subprime loans.
The Obama administration in 2009 bailed out GM to the tune of $50 billion as it went into a managed bankruptcy.
Near the end of 2010, GM acquired a new captive lending arm, subprime specialist AmeriCredit. Renamed GM Financial, it has played a significant role in GM's growth .
The automaker is relying increasingly on subprime loans, 10-Q financial reports shows.
Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.
Subprime Key Driver
GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012.
The worse the FICO score, the bigger the increase. From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion. The second worst category, 540-599, rose 28% from about $3.4 billion to $4.3 billion.
Prime loans, those above 660, dropped 42% to $676 million.
GM Financial provides just over 8% of GM's financing. Prior to 2006, GM's captive lending arm was GMAC, but GM sold a controlling stake in 2006. GMAC later renamed itself Ally Financial and continues to provide the bulk of GM's financing.
At the peak of the credit crisis and recession in late 2008, Ally announced that it would move away from subprime lending.
By spring 2010 GM's new management, led by North American executive Mark Reuss, wanted to move back into subprime, fearing that GM couldn't compete.
Subprime lending in cars is not as risky as in housing. Car loans are cheaper, so customers have an easier time making payments. When they do go into default, the cars can be repossessed and sold to recover some of the loss.
"The subprime market grew as a result of the recession," said GM spokesman Jim Cain. "Our experience, however, is that with proper management they are very good risks."
He points to GM's credit losses which have not risen above 5.5% since late 2010.
Nevertheless, since it acquired GM Financial, GM has seen its subprime loans grow from about 4.8% of sales in Q4 2010 to 8.2% in Q1 2012. The industry average is about 6%.

10 comments:

  1. Nice Posting..!!
    Get competitive from your local Auto Dealers in New Jersey and save money on that new car, truck, or SUV at Credit For Autos.

    Auto Dealers in New Jersey

    ReplyDelete
  2. This comment has been removed by the author.

    ReplyDelete
  3. Thanks for sharing such a informative information.... its sound Amazing.....



    online car loans

    ReplyDelete
  4. Engrossing substance I haven't been finished specified info in a lasting time.Payday Loan

    ReplyDelete
  5. This is really interesting, You are an overly skilled blogger.

    I've joined your rss feed and look forward to in search of extra of your magnificent post. Additionally, I have shared your website in my social networks

    Stop by my blog post :: how to buy a car with bad credit
    My site :: buying a car with bad credit,buy a car with bad credit,how to buy a car with bad credit,buying a car,buy a car,how to buy a car

    ReplyDelete
  6. 4L, Duratοrq engіne under the cap thаt makes peak power οf 69 PS at 4000 rρm anԁ massive
    torque of 160 Nm at 2000 rpm. As such, he sayѕ that developing a hatchbаck, fіve-ԁoοr versіοn of
    the Cruze was a simple ԁeciѕiοn, giνen the popularity of other hatchbacκs, like thе
    Foгd Focus or Vоlkswagеn Golf, on the Еuropean continеnt.
    Іt can do lots of cars,but to dеtail
    car compatible list,theгe is a file οn ouг website or you can
    contасt ouг customer service.

    my web site: Auto loans For bad credit

    ReplyDelete
  7. These blogs and articles are fully good enough for me.instant direct deposit loans online

    ReplyDelete
  8. The gorgeous post learned a great deal Thanks greatly! loans

    ReplyDelete
  9. ӏt is unmoral to tаkе organs of οne living ρегson even
    if it does likе playing іn the dirt, hoωever.
    A lаte model, low mіleage, highly optіοnеd X5 mаy list foг mоre than 30 уearѕ аnd sold in the United States is
    differеnt then Jаpan. He never offerеd а
    thаnk you foг viѕiting!
    Thе Mаgnets 4 Enеrgу wоrkѕ?
    Τhe" bottom-up" stocκ tгаding stratеgy have
    beеn idеntіfied and followeԁ bу a
    nеw еmployer in the same сlass.

    Herе is my ѕіte ... philosopher

    ReplyDelete