By on January 2, 2009

The federal government buys GMAC and the MSM says huzzah! The credit taps are slowly starting to reopen! Meanwhile, on the front lines, the same scum-bags who helped cause this economic crisis by pushing people into cars (and houses) they couldn’t afford are busy reinventing the same wheel that came off before. In other words, predatory lending is back (did it ever leave?). And it’s bad! The Orange County Register lifts up the rock to reveals the slugs underneath (now with federal backing). In Q & A format, no less.

Q: What is the most important thing for customers to know going in? 

A: ‘It’s not score-driven. The minimum they are saying is 621, but you can have a bad 621 and a good 621,’ [finance director at Tustin Buick Pontiac GMC Hummer Jane] Griffin, said about credit scores. ‘It doesn’t mean that ‘poof,’ if you have 621 you’re approved. But if you’re not a credit criminal or skip risk, most likely you will be approved.'”

How… reassuring. Ready for more? You know you are.

“Q: What other kind of requirements are you looking for in a buyer seeking financing? 

A: ‘You just have to have a real person with a real job, and the banks will finance it,’ said Jeff Garcia, finance director at Simpson Buick Pontiac GMC in Buena Park. ‘Also, have a 10 to 20 percent down payment.'”

Q: GMAC immediately said it would loosen financing standards after the deal. Did customers just as quickly come to the car lot?

A: ‘(On Tuesday) we had a frenzy of customers. Unfortunately we didn’t do much (in sales),’ Griffin said. ‘People were coming in wanting to buy a $50,000 with $300 a month.’

“Q: Anything else customers should know as they head to dealerships?
A: ‘Come in, work with us and we will work with you, but don’t come in having unreasonable expectations, like trying to roll in thousands of dollars from your previous loan,’ Griffin says. ‘Everyone is financeable. Everyone,’ Garcia adds. ‘You just have to be on the right unit. Don’t be 25 and try to buy a $50,000 car.'”

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20 Comments on “A Look at the “New” GMAC From the Sharp End...”


  • avatar
    bjcpdx

    So let me get this straight. Before the taps closed, they were financing people who weren’t real who had jobs that weren’t real? Oops, I just answered my own question.

  • avatar
    Joe ShpoilShport

    Hopefully one of the things that is happening in the world of consumerism is that consumers are getting wise to many pitfalls of borrowing and are not willing to just sign on the dotted line.

    Case in point, this quote: ‘Also, have a 10 to 20 percent down payment.’” IS there a car GM (Chrysler? Ford?) makes that you can buy that the minute you drive it off the lot you haven’t lost your 10 to 20% down? I don’t think there is. Who would want to buy something financed by a company with a noose in it’s hand and pay 20% of your good money that will go POOF the minute you sign? I just wished someone would have explained this to me sooner. Maybe someone tried.

  • avatar
    FrustratedConsumer

    “…but don’t come in having unreasonable expectations, like trying to roll in thousands of dollars from your previous loan,’ Griffin says”

    You mean the same practice you’ve been encouraging for the past 5 years to move metal out the door?

  • avatar
    dwford

    Before the “taps closed” banks were willing to lend up to 140% of the value of the vehicle – allowing people to refi negative equity onto their new vehicle. No more, unless you have excellent credit.

    Before, banks were more lax about requiring proof of income for lower credit score customers, but not any more. Unless you are over 700, expect to be asked for a paystub.

    Before, F&I guys could fudge the equipment on a used car to inflate its value and get more money bought for the customer – now banks are more likely to call the customer after the sale and verify equipment on the vehicle.

    And. yes, that guy is right. There is such a thing as a “good” 621 and a “bad” 621 credit score. Good would be a perfect payer with a light credit history whose credit score is on the way up. Bad would be someone whose score is going down because they have a high debt to credit limit ratio (credit cards maxed out), or that has suddenly has trouble paying bills and has let some go late onto the credit report – signs of financial trouble the bank wants to avoid..

    It never hurts as a customer to know your credit score and to go online to run some payment scenarios with a loan calculator before you go, so you’re not one of those people trying to buy a $50k car for $300 an month (yes those dopes are out there..). Figure about $20 in payment for every $1000 financed for a 60 month loan.

  • avatar
    porschespeed

    Q:“So it’s no longer financing for ‘anyone with a pulse’?”

    A: “No. We have learned from the excesses of the past. You must now be able to fog glass as well.”

  • avatar
    Luther

    Welcome to the world of counterfeit fiat currency…Inflate or Die!…It’s a Keynesian brat thing.

  • avatar
    PeteMoran

    @ luther

    You probably have it. If you examine the mistakes the Japanese made by allowing deflation in their economy during the 1990s you discover that they (were) only just coming out of that problem a few years ago.

    Inflation via printing money, easy credit to slow and/or reverse the need for “asset” prices to fall or be discounted, is about the only way left to get the debt/equity ratios of the whole world to stabilize.

  • avatar
    Robert Schwartz

    $50K at $300/mo? The 14 year car loan?

  • avatar
    porschespeed

    Robert,

    Actually quite doable in the form of a lease, or a ballon-note.

    Theoretically, at least, probably not a lot of that paper being written right now.

    But, I do know people who have done deals in that vein.

  • avatar
    toxicroach

    Well, it kind of sounds like something like what it should be.

    They were financing people who were getting way way way over their heads. Glad to see they saw the problem with that, even if the economy had to tank before they figured it out.

  • avatar
    Chris Inns

    $50K at $300/mo? The 14 year car loan?

    More like the 20 year car loan once you factor in interest.

  • avatar
    allegro con moto-car

    dwford: About $20/month for every $1,000 financed over 60 months correlates to an interest rate of 12 and 3/4 %. Isn’t that kinda high for our low interest rate environment? Or is that the interest rate for a sub-620 FICO?

    Thanx…

  • avatar
    no_slushbox

    This interview makes it sound like the dealers are actually going to be using proper underwriting standards, but they have no incentive to. The dealer’s incentive is to push the financing as far as it can go to make a sale, and now the government is footing the bill.

    Also, “[p]eople were coming in wanting to buy a $50,000 with $300 a month”?

    What the hell does a Pontiac/Buick/GMC dealer have for $50K? With redtag plus cash on the hood their top out should be around $30K.

  • avatar
    davey49

    My good friend is likely one of those “good” 621s.
    He’s never had credit cards or car loans, just student loans and he’s had the same job for 8 years now. I’m a bad 621 (more like a bad 595)
    He could probably handle paying for a Cobalt
    joe shpoilshport- If you keep a car until it is worthless, you lose nothing. Depreciation only means something to the 3 year and out crowd.

  • avatar
    ronin

    Six months ago when GMAC made a risky loan, there was a real danger that the loan would default and GMAC would have to eat it.

    Today it has been proven that if such a loan goes bad, GMAC will not have to eat it. Now, taxpayers will have to eat it.

    There is now more incentive than ever before for GMAC to give loans to anyone that walks into the store. Anyone. They have absolutely nothing to lose. The Fed, the Administration, and Congress will cover their backs.

    The very practices that got GMAC into this mess in the first place will now accelerate tremendously, since now they have absolutely zero risk. However, if they make a profit, the profit is theres.

    It’s the Amero-Soviet way!

  • avatar
    ttacgreg

    14 year car loan? HELL YES! Wear the vehicle out totally in 8 years, stop making payments, and let them repo it!

  • avatar
    toxicroach

    no-slush:

    You can get a 50k F-150 if you really try, so I imagine you can go that high with a Silverado or something.

    Regardless, you can easily get up to 50k by trading in your one or two year old GM product (which has been depreciating like MAD), and them tacking the deficiency on to the new car loan, you can get to 50k no problem.

  • avatar
    akcarguy

    allegro con moto-car:
    Check your math it’s $20 per thousand at 7.41% apr. Not unreasonable in the current climate.

  • avatar
    TexN

    I’m reminded of the story of the guy who walks into a financial planner’s office and says, “I have $100,000 and I want to retire now with an annual income of $50,000.” The planner replies, “The good news is that I have a plan that will work for you. The bad news is that you have to die in two years.”

  • avatar
    Joe ShpoilShport

    @ davey49:

    You are correct about if you keep the car forever it’s not a factor. However, in light of todays finacial situation, unless one is very comfortable about their situation long term buyers are much more wary about making that plunge. Now, the difference between one car losing 30% off the lot and another 10% makes a big difference.

    The other point is that it is YOUR money that goes away immediately, with the banks interest more likely recoverable.

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