Bailout Watch 276: Midwest Credit Unions Offer $10b Worth of Loans for GM Cars (fine Print Below)
End of Days’ Sale, I guess. Seriously, there is some strange shit going down in the autoblogosphere today. Automotive News [sub] pegs my WTF meter with “Midwest credit unions pledge $10 billion in auto loans to help GM.” According to AN, here’s the deal. “A group of credit unions from Michigan, Ohio, Indiana and Illinois is pledging $10 billion in low-cost auto financing to its more than 12 million members for the purchase of General Motors vehicles.” Hmm. Low cost? Like HOW low-cost? Zero percent? Once again, AN fails to provide the money shot (so to speak). So I click onto the relevant website: ilovemycreditunion.org. Rates? Nada. But there is a GM discount, revealed in the article as… wait for it… $250. OK, click on the credit union discount button. Whoa! $250 bucks PLUS “supplier pricing.” Click on Contact Us, call the toll free number and voila! I’m through to GM. The rep wants to give me an authorization number. Yes, but what about the finance rates? Hang on, I’ll transfer you to GMAC. So, it’s like that is it? Yes, it is. Oh and the two-mode Saturn Vue hybrid is excluded. Go figure.
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@miked - Where exactly did you read that they plan to make a bunch of bad loans? Credit unions (I belong to one) typically do offer lower cost loans than banks, as they do not have the overhead of the banks. They do credit checks like any other lending institution. When I buy a vehicle I always evaluate the interest rate from my credit union as compared to any subsidized rates offered through the dealer, which many times are an either/or with cash incentive and many times it makes a whole lot more sense to get the cash and go with the credit union. @TexN - so a consortium of credit unions who make money for their members by loaning money to their members is somehow wrong to advertise that fact? They are still making loans available in areas where their members are likely to have their incomes directly or indirectly affected by the fortunes of the domestic OEM's(like a huge number of people in this country who don't even understand the relationship between their income and their customers incomes). They have arranged for an additional discount and cash incentive for GM vehicles - this just makes good business sense all the way around. Sorry - your argument doesn't hold any water.
They're not going to advertise the bad loans. I'm just speculating. If all the other banks are denying loans for domestic auto purchases (can't find the link now, but that was definitely on TTAC in the last month), that implies that they think the collateral will be worthless (due to impending bankruptcy ruining the residuals on used domestic cars). I'm sure that the decision makers in these credit unions are smart enough to realize that a loan on a domestic car is currently very risky. My guess is that since they're still offering these loans, they're expecting a high default rate. That wouldn't happen in normal times (without a very high interest rate), but since TARP is there to save their ass, then it doesn't hurt to offer the (potentially bad) loan. This is all pure speculation, but as I said before, if I were running a credit union, this is what I'd do. I don't agree with TARP or any of that personally, but if it's there, I'd definitely take advantage of it.
Wait a minute - Wait a minute! This could work! $10 billion in loan money available. At $250 credit per pop, 40 million cinsumers could take advantage of this fantastic offer! If 40 million additional cars sold can't save GM, then I just don't know what could....
"two-mode Saturn Vue hybrid" what sort of craziness is this? Combine that with wonderment as to why Saab is not on employee discount plans and you have to ask yourself; 1. Vue/Saab is popular at the moment, so it's one vehicle that they actually make money on, 2. VueSaab is SOOOoooo unprofitable that everyone drops huge $$$ when they deliver one, or (my contender) 3. Vue and Saab vehicles use parts from a supplier where GM is on CREDIT STOP.