GMAC Hits The Brakes: "We've Been Writing Fewer 72-month Loans"

Edward Niedermeyer
by Edward Niedermeyer
gmac hits the brakes weve been writing fewer 72 month loans

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.

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  • Ihatetrees Ihatetrees on Oct 10, 2008
    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 [s]screw NY's taxpayers[/s] go medicaid when hurt or sick... /rant

  • 50merc 50merc on Oct 10, 2008

    "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.

  • Denial Denial on Oct 11, 2008
    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.

  • Liger Liger on Oct 11, 2008

    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.