Anyone who's tried to go get a loan for a new car has surely found it a bit tougher today than it was just a few months ago. Every automaker is having difficulty selling new cars in this market, and none more so than General Motors and its finance arm GMAC, which recently limited loans to individuals with a FICO rating of 700 or higher. The General has gone so far as to reward salespeople and dealerships for sending customers to financing deals outside of GMAC.
A group of 1,200 Credit Unions in Midwestern states, however, have banded together to offer some $10 billion in new car loans to their members. Not only are these CUs attempting to offer lower rates compared to larger banks, but the Michigan Credit Union League has also arranged for General Motors to offer its members Supplier Pricing, which, on average, lowers the price of a new car by 4.5%. Ford and Chrysler are also reportedly talking with the MCUL to offer attractive pricing options. And gee, if these credit unions have so much money to loan out, why doesn't GM just ditch Congress and ask them for a line of credit?
Last week Congress signed a bill that frees up $25 billion in low interest loans for all automakers (including non-domestics if they plan to spend the money on green tech) and suppliers that spend money in the U.S. to develop green technologies. That was a big deal for Detroit automakers struggling to stay afloat during an abominable automotive downturn. According to the Wall St. Journal, the $700 billion economic "rescue plan" fighting its way through Congress at the moment also includes money to bail automakers out of bad car loans, which in turn would supposedly go a long way toward freeing up money in the woeful car loan market. We're assuming this car loan bailout issue isn't just for Detroit automakers, as several overseas automakers offer financing here in the States, and plenty of banks are knee deep in car loans, as well. After looking at the positively radioactive sales for September, it's clear that the economic crisis is also affecting car sales. Not only are people finding it harder to get car loans even if they have good credit, but many would-be shoppers are staying away from big ticket purchases altogether until this fiscal mess gets fixed.
