Comments on: GMAC Loses $589m in Q1

By: nst101

nst101 — Wed, 30 Apr 2008 11:32:17 +0000

Uh Oh. We’re in the process of buying a house and GMAC is who we’re going through for our mortgage ): What happens if your mortgage company goes bust?

By: timd38

timd38 — Wed, 30 Apr 2008 00:58:32 +0000

Just think, they just gave me a 4.75% mortgage and they will most likely pay 5.5% for the money. Just like Chrysler, they will make it up on volume….

By: jthorner

jthorner — Tue, 29 Apr 2008 21:10:02 +0000

Tightening floor plan credit is probably the simplest way for GM to thin the dealer herd. They could do so easily now as credit is being tightened everywhere. The weakest dealers would be the first to fold their tents.

Surely somebody at HQ has thought of this, right?

P.S. Floor plan lending is a revolving credit loan made to the dealer and secured by the dealer’s inventory. As far as retail sales go, GMAC accepts or declines applications on a case by case basis. Historically the captive credit companies of the auto makers were incentivized to move the metal by making the loans, but now with bankers owning a majority of GMAC things might get tougher.

By: yankinwaoz

yankinwaoz — Tue, 29 Apr 2008 19:27:13 +0000

Vetteman,
Can you explain that for those of us who have never had a car loan, or a dealer arranged financing. Thanks.

If I understand what you are writing, you are saying that only GMAC is crazy enough to offer wholesale financing to dealers. I am trying to understand why that is.

Doesn’t GMAC, the holder of the note, get to accept or decline customers? Or is that the job of the dealer? Are the dealers gaming the system and tricking GMAC into loans that they would not normally accept?

How does “floorplan” financing differ from normal car loans? I don’t understand. If someone is a bad risk, GMAC doesn’t have to take them. I can certainly see where a dealer has a strong incentive to get a customer a loan to buy a car, especially when someone else takes the risk.

I’m confused.

By: Vetteman

Vetteman — Tue, 29 Apr 2008 17:21:50 +0000

I retired from a GM dealer three years ago but still stay in touch with many good friends in the industry. One thing that has happened in the last year or so is many dealers can no longer get their floorplan loan from anyone but GMAC. Most banks have pulled out of that business because of the higher risk nowadays that a dealer will go broke . Many financial institutions aare especially leary of domestic dealers as they see them as the weakest financially. What occured to me today after reading your article is GM dealers will be in a life threatening situation if GMAC blows up and starts pulling flooring. I dint think they will be able to get anyone else to pick up the flooring line especially for dealers that have weak balance sheets. This could start a wave of dealer bankruptcys.