GMAC aid to trickle to Valley car buyers

By Don Shilling

Local dealers expect GMAC to start offering leases again.

GMAC Financial Services will receive bailout money from the federal government and is looking to pass it along to car buyers.

The auto financing company Tuesday lowered the credit score needed for people to get a loan and unveiled some low-interest rates for General Motors vehicles.

Plus, local car dealers said they’ve heard GMAC leases are coming back.

“It’s great news,” said Mike Hudock, general manager of Stadium GM Superstore in Salem. “Hats off to everyone for helping GM.”

Both the automaker and the financing company, which is partly owned by GM, had been teetering on the edge of bankruptcy until the government stepped in.

GMAC was approved for a $5 billion loan after it completed necessary financial transactions to become a bank holding company.

Dave Sweeney, co-owner of two GM dealerships in Boardman, said easier financing is crucial to turning around GM, which is to receive $9.4 billion in a first round of federal loans.

“The bailouts will not be successful if the public doesn’t get engaged and start buying cars again,” he said.

GM will close many of its assembly plants in January, including its Lordstown complex, because dealers have high inventories and aren’t ordering cars.

Many GM customers were shut out of financing this past fall because GMAC stopped making leases and stopped lending money to anyone who didn’t have a credit score of 700, which is considered a strong credit rating.

The financing company said Tuesday that it would make loans to customers with scores of 621 or higher.

The change is significant, said Barry Gonis, general manager of Spitzer Chevrolet in North Jackson, because most of that dealership’s customers fall in between 621 and 700.

“Being over 700 is not an easy score to get,” he said.

Car dealers have been working with banks to provide financing for consumers with sub-700 scores, but Hudock said GMAC will offer them lower interest rates and more flexible terms.

Sweeney said customers will be helped because dealers and GMAC are used to working with each other. Dealership officials call GMAC and work out each deal, he said. Those same relationships aren’t there with banks, so often the deals aren’t as good, he said.

GMAC said Tuesday that it was offering financing rates between zero percent and 4.9 percent for many 2008 models and between 3.9 percent and 5.9 percent on many 2009 models.

The return of GMAC leases would be the next big step to move cars off lots, dealership officials said. They said they’ve heard talk that leases are coming back but haven’t heard anything official.

They aren’t expecting a return, however, of the bargain-rate leases of recent years.

Gonis said GMAC lease payments used to be so low that GM was losing money on vehicles when they were returned after a lease expired. Lease payments at times were totaling only about 30 percent to 40 percent of the value of the vehicle, and GM couldn’t make up the difference when it sold them at auction.

Plus, people with expiring leases weren’t buying their cars because they could buy a used car on the lot much cheaper, he said.

Gonis said he expected new lease deals to cover 60 percent to 70 percent of the value of the vehicle.

In the future, lease payments may be about the same as payments to buy a vehicle, but lease amounts would last for 30 months instead of 60 months with a loan, he said.

Having GMAC on sound financing footing also is important to dealers in another way. About 85 percent of GM dealers rely on GMAC for financing the cars they buy from the automaker, and many had been speaking to banks about replacing that financing.

Sweeney said the federal loans should put such concerns to rest.

He added that it appears that car buyers are regaining their faith in GM after weeks of wondering whether the automaker would have to file for bankruptcy.

On Monday, Sweeney Buick Pontiac GMC posted its best sales day in three months.

“It looks like the bailout news is finally reaching Main Street,” he said.

The Sweeney dealership sold about 40 new and used vehicles Monday, compared with the 10 or 15 it had been selling per day since September. The week between Christmas and New Year’s normally is good for business, but Sweeney said he normally would sell less than 30 vehicles, even in good years.

shilling@vindy.com