GMAC Financial Services has said it would immediately resume auto financing “for a broader spectrum of US customers” as a result of expanded access to funding as a bank holding company.
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The company would modify its credit criteria to include retail financing for customers with a credit bureau score of 621 or above, a significant expansion of credit compared to the 700 minimum score put in place two months ago, GMAC said in a statement.
The company, hit hard by the credit squeeze, has gone as far as pulling out of dealer and/or consumer financing in some countries.
GMAC’s application to become a bank holding company was approved by the Federal Reserve Board of Governors on 24 December and the company has also received a US$5bn investment from the US Treasury Department as part of the Troubled Assets Relief Programme (TARP).
“The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers,” said GMAC president Bill Muir.
“We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis.
“We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the US.”
GMAC nonetheless said it would not finance higher risk transactions characterised by a credit bureau score of 620 or below and would use both GMAC Bank and funding from other sources to resume its traditional spectrum of prime-based credit, appropriately pricing for risk and requiring down payments where necessary.
“The majority of GMAC’s auto financing has been in the prime arena,” Muir said. “Therefore, opening access to credit for those with CB scores of 621 or better will allow us to return to more normal levels of financing volume, and should help in efforts to stabilise the US auto industry.”
GMAC’s expanded financing policy and improved retail financing rates will apply to both new and certified used vehicles. Dealer wholesale financing remains a priority for GMAC, and is unchanged, it said.
The Treasury Department said earlier it would receive preferred shares paying 8% dividends and warrants to purchase additional shares in return for its $5bn.
The Treasury also said it would lend up to $1bn to General Motors to purchase additional equity that GMAC planned to offer to help raise additional capital.
