GMAC Runs Out of Gas

Bloomberg reports that GMAC has sent “Dear John” letters to an unspecified number of GM dealers. One of the missives informs GM stores that the captive financier will no longer provide them with financing to buy vehicles. “Turbulence in the markets reduced our access to funds and increased the cost of funds where available,” GMAC Chief Executive Officer Al de Molina explains. “In response, we adjusted our credit policy to reflect the reduced level of funding availability.” GMAC has also sent notification to other dealers– which could include some of the previously mentioned ones– that the franchisees will have to start repaying their loans after financed vehicles have been on lots for 180 days. Hang on; is this part of a conspiracy by GMAC’s majority owners– Chrysler-owners Cerberus Capital– to force GM to buy ChyrCo? No se. Meanwhile, more details on the changes after the jump. Meanwhile, bye-bye GM dealers. “You’re increasing their payments or you’re taking away financing altogether for a lot of dealers, which basically has the effect of shutting many of them down,” said Denny Fitzpatrick, chairman of the California New Car Dealers Association and Fitzpatrick Chevrolet Hummer in Concord, California. “Dealers just don’t have that cash lying around.”

“Under the new arrangements, [GM] dealers in November will be required to begin paying down their principal balance on the loans at a rate of 5 percent monthly for 2008 models and 10 percent monthly for 2007 vehicles, according to the letters. GMAC said it will also cut the size of the loans to dealers for used vehicles to between 70 percent and 90 percent of the cost, starting Jan. 1. The lender will require 30 percent of the initial advance to be paid off by the sixth month the vehicle is on the lot. After six months, it expects full payment, GMAC said.”