NEW YORK (AP) - General Motors’ financing arm said Wednesday it will temporarily waive some dealer fees and make $5 billion available for loans to an expanded pool of potential car buyers in a bid to halt the extended slide in U.S. vehicle sales.
Car dealers nationwide have been hammered by low consumer confidence and worries among potential buyers about the future of the U.S. auto industry.
A lack of available credit also has left many consumers who might be still looking for a new vehicle without the affordable financing they needed to make a deal.
GMAC Financial Services LLC’s announcement came shortly before Wednesday’s expected release of another month of dismal U.S. sales figures by GM and other automakers.
GMAC President Bill Muir said the sales plunge has resulted in vehicles piling up on dealer lots for longer amounts of time, meaning higher financing charges for dealers and causing the vehicles to lose value as they age.
“It’s somewhat of a double whammy for the dealerships,” Muir said.
As a result, GMAC said it’s eliminating all dealer curtailment payments _ which require the repayment of part of a dealer’s wholesale loan if a vehicle goes unsold for a certain amount of time _ for aging inventory during the month of April.
In addition, GMAC, which provides financing to both General Motors Corp. dealers and customers, is waiving through June the fee for posting aging vehicles on its online site. It is also allowing some dealers to postpone wholesale interest charges for two 30-day periods over the next four months.
At the same time, the company said it is setting aside $5 billion for consumer loans over the next 60 days and will resume lending to consumers with credit scores below 620. Muir said other factors, such as the applicant’s job and financial history, also will be taken into account in deciding whether to grant financing.
GMAC also said it will cut certain rates for both new and used vehicle financing, but didn’t specify by how much.
Muir said the change is a return to business practices that where in place before the tightening of credit markets forced GMAC to raise its minimum score.
In October, GMAC said it would limit auto loans to consumers with a credit score of 700 or higher. That requirement was later rolled back to 621 after GMAC received bank holding company status and $5 billion in emergency federal aid late last year.
Muir said that in the months since, the flow of applications for financing has dwindled to such a low level that the company decided to expand its pool of applicants.
“We have the underwriting capacity to pick through and choose the ones we think will be able to best repay,” he said. “We’re just expanding back to where we once were and this is just another step along the way.”
John McEleney, a Clinton, Iowa, auto dealer who serves as chairman of the National Automobile Dealers Association, said the changes will be a big help to the 70 percent of GM dealers who get their financing through GMAC and could keep some of them from closing up shop.
McEleney said the addition of customers with lower credit scores could increase the pool of potential car buyers by 30 percent to 35 percent and could be a sign that GMAC is on the rebound from the financial problems that had pushed it to the brink of bankruptcy late last year.
“We think this is very positive,” he said. “I think it indicates some strength on the part of GMAC, that it’s going to be in a position to lend that it hasn’t been in for several months.”