By on October 10, 2008

So GMAC doesn’t lease anymore, and its ResCap mortgage arm is properly screwed… but they still write car loans, right? Er, sort of. Automotive News [sub] reports that GMAC is limiting loan terms to 60 months beginning this week. “We’ve been writing fewer 72-month loans,” Mark LaNeve, GM’s vice president of North American sales, service and marketing, tells AN. “In September and October, we did a much higher percentage of cash — meaning non-lease or non-APR, than we did in decades.” Which is an extremely cheerful way of saying GMAC is fucked. In September 2008, loans of 72 months or more accounted for 43.0 percent of all loans approved by GMAC, according to Power Information Network. That figure was down from 72.9 percent in July and about the same as the 42.0 percent in February. The really bad news? Loans of 60 to 72 months accounted for 45.5 percent of all loans approved by GMAC in September, up considerably compared to months past. In other words, 88 percent of all loans made by GMAC in the past month were for 60 month terms or higher, and the music is beginning to stop. GMAC spokesfolks insist that the “tightening of underwriting standards” has been going on for a year, and that the new restrictions on 72-month loans will only affect a “small percentage” of GMAC customers. For now. If GMAC’s forced to restrict 60-month loans (a scandalously long auto loan term just a few decades ago) there goes some 80 percent of its new business. Gulp. As for GM dealers, they’re already shopping for loans elsewhere.

Get the latest TTAC e-Newsletter!

15 Comments on “GMAC Hits The Brakes: “We’ve been writing fewer 72-month loans”...”


  • avatar
    ihatetrees

    A 72 month note on a car is nutty.
    I must have a very strange demographic of friends and acquaintances. No one I know has (or will admit to having) such a loan.

  • avatar
    Matthew Danda

    In 2005 GM was considered by many analysts to be a financial company that makes cars on the side. This is because the financial arm was their primary source of profits. So…what the heck are they now?

  • avatar
    BlindOne

    Why would you ever get more than a 3 year note? If you can’t afford to pay it off in 3 then buy something cheaper.

  • avatar
    toxicroach

    My personal limit is 48 months, but I don’t like car payments over $300.

    The 72 month notes were GMs way of cramming people into new cars that were unfit to own a new car but wanted one anyways. As simple as that. Before this all hit the fan, I believe they were up to occasionally doing 80+ month notes. I’d imagine most v6 mustang sales were 60+ month loans.

    A sizable chunk of GMs customer base was image conscious, $12/hour, not to smart with money people, because GM & Ford & Chrysler were the only ones willing to lend them.

  • avatar
    konaforever

    “A 72 month note on a car is nutty.
    I must have a very strange demographic of friends and acquaintances. No one I know has (or will admit to having) such a loan.”

    Not if the loan is at a subsidized rate of 0-2.99 percent. Then it can be quite smart.

  • avatar
    psarhjinian

    Not if the loan is at a subsidized rate of 0-2.99 percent. Then it can be quite smart.

    If you have the cash and can invest it in something and get a decent rate of return. Otherwise, depreciation is still your enemy.

  • avatar
    ronin

    >>”In 2005 GM was considered by many analysts to be a financial company that makes cars on the side… So…what the heck are they now?”

    They are now a welfare queen, who makes money neither by selling cars nor financial products. They make money by accepting free welfare from taxpayers.

  • avatar
    Detroit-Iron

    The first time I bought a new vehicle (a craptastic S-10 that made me a committed non-GM buyer) I overheard the salesguy in the next cube trying to get a woman into a 72-mont LEASE, on a METRO!

  • avatar
    threeer

    My one hope in all of this economic downturn is that people return to some semblance of fiscal conservatism. 72 month loans are the other side of insane. This “gotta have it now…and gotta have it bigger/faster/better” BS is a good part of what lead us down the road we’re in to begin with (that, and there were plenty of companies more than willing to allow us to go there). In 1981, I can remember sitting on the couch, staring at $8000 in cash that my parents had just withdrawn from our bank in order to purchase our new Toyota Corolla. For the record, we weren’t ever wealthy…far from it, my father was a career soldier (not officer), so $8000 saved represented quite a commitment. Years later, when my mother went to purchase her new 2003 Toyota Corolla (yeah, the trend you sense is correct), the dealer asked her how she planned to finance the $19,000 price tag. The look on his face was priceless when she replied she would pay in cash. I’ve struggled to live that same way, but I’m coming around. Working on selling the monthly payment to outright buy a car to get back and forth to work in. Loose financing and outrageous loan terms have sucked the financial lifeblood right out of our country.

  • avatar

    I do believe at one point they were offering 0% financing for 72 months . . . . . think about that for a second.

  • avatar
    psarhjinian

    I do believe at one point they were offering 0% financing for 72 months . . . . . think about that for a second.

    They still are, in Canada. I can get an Astra (not a bad car, pity about the legroom), Aura or Vue for [email protected] now; I haven’t checked their other offers, but I imagine that, aside from the Sky and Aura GL, they’re all like this. They have to be, after leasing became a no-go.

    None of these are bad cars, really, but you’d have to be unhinged to sign up for a six-year finance deal, especially with GM on the ropes. I thought about it, but it’s a really, really hard sell, even with family discount pricing.

  • avatar
    ihatetrees

    toxicroach :
    A sizable chunk of GMs customer base was image conscious, $12/hour, not to smart with money people, because GM & Ford & Chrysler were the only ones willing to lend them.

    Yeah, there’s a lot of that. I’ve contracted at places where Temps often have newer vehicles. And they’ll balk at paying $160/month for health insurance. They’ll just go naked and screw NY’s taxpayers go medicaid when hurt or sick… /rant

  • avatar
    50merc

    “88 percent of all loans made by GMAC in the past month were for 60 month terms or higher”

    Caramba! Anybody here notice the connection between what’s described in this article and the discussion of reasons for “The Great Auto Industry Crisis of 2008: History” (editorial section)?

    Just after I got out of college I decided to buy a used Jaguar. (Talk about unreliability…) The bank told me they didn’t feel comfortable with the loan I wanted. GMAC, however, was happy to facilitate my foolishness.

    It took me a while to honorably get out of the predicament, but I never repeated that mistake. GMAC seems to be slow learner.

  • avatar
    denial

    If you have the cash and can invest it in something and get a decent rate of return. Otherwise, depreciation is still your enemy.

    Why? A car depreciates irrespective of whether it’s financed for 36 or 72 months — or even if its just bought in cash from day 1. So unless it’s psychologically unpleasant to carry a long loan, if you can get one at a low rate (especially 0%…low enough for me) then I don’t see why anyone would balk at making the loan term as loonnnnnng as possible. If you find a buyer between purchase date/term complete then just pay off the loan in full — it’s amortized from day 1 with all taxes, fees and finance costs, so the car finance company would be only too happy to get their $ quicker.

    Even though we’re talking compounded interest and not simple interest here, I’d still say if you’re going to finance and can ‘co-exist’ with the symbolic idea of a car loan for a few years, and if the rate is below 3%, go as long as possible.

  • avatar
    Liger

    I financed a 2006 GTO for 72 months around the 4th of July in 2006, when GM was running it’s 72 hour sale. 0% for 72 months is a great deal. Why wouldn’t you take advantage of no interest on a car for 6 years?

    I don’t think I would finance a car paying interest for 6 years though. You would be paying quite a bit of interest then.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Albigensian: I bought my first car in 1982: a brand-new Toyota Tercel. I’m pretty sure I paid about $5,400. for it....
  • bd2: Ironically, NAFTA decimated the small farmer in Mexico (subsidized American big agri) – which often meant...
  • bd2: The plant that builds those pickups in Mexico opened in 1994. Ford built Lincolns in Mexico and now the Mustang...
  • C5 is Alive: Except that the ES250 was introduced two model years after the last Cimarron infested Cadillac...
  • Jeff S: @jmo2–Much easier to work on a 70s car than a present day car because there were no computers. As for...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber