GMAC Uses Government Aid

[Jan 7, 2009.]

 

GMAC is blanketing the auto loan news these past few weeks thanks to GM’s government financial aid.  On top of that the US Treasury said late Monday it would purchase five billion dollars in shares of GMAC to help support the company seen as critical to the auto sector.

The Treasury also announced a one-billion-dollar loan to General Motors so GM can buy additional equity in GMAC, which the Treasury could take on demand.

GMAC’s niche for many years was financing the GM buyers market by being the only company in which GM could use for their financing incentives.  Removing this limitation was part of the agreement GM had with the government in order to receive aid but in the end GMAC may be coming out ahead.

GMAC, which provides GM dealer and customer financing along home loans, disclosed the terms of the agreement in a regulatory filing Friday. The lender said the government will get 5 million preferred shares of GMAC paying 8 percent interest in exchange for its $5 billion capital injection to help GMAC avoid bankruptcy.

This money had an immediate impact to local dealers who are now able to offer zero percent financing and low-interest rate auto loans to customers.  Taking it one step further GMAC has lowered their minimum credit from 700 to 621 fico opening the door for even more car buyers.  This is a direct impact of the federal aid.

"We're very excited to offer this reduced rate financing through GMAC to encourage our customers to get back into the game," said Mark LaNeve, vice president at GM North America.

GM said loans through GMAC at zero percent would be offered for up to 60 months for many vehicles, with other loans ranging from 0.9 percent to 5.9 percent.

Source: Associated Press and Google News

 

About Author:

Brent Lane is a Mortgage Consultant in Roseville, California. He helps homeowners in California with their mortgage financing and writes on his BLOG at www.thelanegroup.blogspot.com