Inventory Floor Planning Solutions

Archive for April, 2009

Credit is Available!

The tight credit market has left many car buyers worried about whether they will be able to finance their purchase. After all, more than 90 percent of new-car purchases are financed. While the current economic troubles have affected many sectors, consumers should know that credit is available in the automotive sales industry.

“It may be a tough time for business, but it’s a great time for consumers who have a stable job and solid credit scores,” said NADA’s 2009 chairman, John P. McEleney. “There are plenty of incentives that lower costs. Dealers can help find financing. And the quality of today’s vehicles is the best ever.”

Auto sales account for $690 billion of U.S. retail sales, which is about 20 percent of all retail sales in the country.

“Most people have heard the expression, ‘All politics is local.’ The same is true of credit. All credit is local,” McEleney said. “The fact is local dealers have access to multiple sources of financing, including many community banks and credit unions that have plenty of money to lend.”

Source www.NADA.org

Technorati Tags: Auto Loans, Credit, Financing

There is no doubt that car dealers have been going through difficult times in 2008.  This has been a year for testing the strength of car dealers and the dealers that survive will prove to be well-capitalized and well-managed.

Although the used car business has been going through a recession, the franchise dealers have been experiencing a depression.  People that need to purchase a car have been keeping the market alive – it has been a “need” driven market as opposed to a “want’ driven market.  Dealers that have catered to this “need” market have performed, while the new car dealer in the “want” market has experienced difficulty.

The used car dealer has far less overhead than a new dealer and has the flexibility to react to changing inventory needs – this dealer has absolute discretion in what inventory he purchases.  The used car dealers that have that have capitalized these strengths have the management skills to do well in years to come.

We believe Dealers First Affiliates effectively demonstrates a more secure means of reentry into this market for local lenders. Our business model offers a simple and fair way of doing business, and the accessibility and appeal of a hometown setting encourage strong, long term relationships with dealers. Our computer software provides both lender and dealer with concise, pertinent information and can enable you to create a highly competitive profit center within your organization.

Technorati Tags: Floorplan Financing

Lender also restores retail financing to subprime customers

Donna Harris
Automotive News
April 1, 2009 – 10:16 am ET
UPDATED: 4/1/09 12:39 p.m. ET

In a sharp reversal, GMAC Financial Services said today that it has backed off a tough new inventory repayment policy on aging new vehicles and has agreed to resume subprime lending.

GMAC also said it is pumping $5 billion more into consumer auto loans over the next 60 days.

The initiatives are designed to boost auto sales and help keep struggling dealers afloat, said GMAC President Bill Muir.

“Dealers have told us that cash flow is critical right now,” Muir said in a statement. “We want to do everything possible to help dealers sell their inventory of cars and trucks, while preserving their working capital during the next couple of months.”

Eliminating dealer curtailments

GMAC said it immediately will eliminate all dealer curtailment payments for older new-vehicle inventory during April. Curtailment is a standard industry practice accelerating the payoff of inventory in stock for an extended period.

In January, GMAC said it would increase the amount it charged dealers to keep some aging new vehicles on their lots. The accelerated payment schedule began in March and applied to new vehicles with model years of 2007 or older and new 2008 vehicles financed before Sept. 1, 2007.

GMAC also is waiving fees it charged dealers to post older vehicles on SmartAuction, GMAC’s online remarketing site, through June. The waiver is designed to help dealers clear their lots of older vehicles.

And the company is letting some dealers postpone interest charges on inventory financing for two 30-day periods over the next 120 days. Dealers can start the deferral program beginning with their interest bill for March. The payment for deferred interest will be due 90 days after the month the charges are postponed.

The program “can be a significant temporary boost to cash flow,” Muir said. “Our goal is to ease the burden on dealers over the next few months as they work hard to lower costs, reduce inventory and protect their financial stability.”

Return to subprime

GMAC is getting back into subprime lending, agreeing to extend credit to retail customers with credit scores below 620 — on a limited basis. These customers still will need to qualify for financing, GMAC said in its announcement. It did not specify those requirements.

In October, GMAC introduced a minimum credit score of 700. After receiving federal aid in January, the lender lowered the minimum score to 620, the conventional cutoff below which customers are considered to have risky credit. But the company announced it would shut down its subprime subsidiary, Nuvell Financial Services.

GMAC also is increasing advance rates for car loans with terms of 60 months or fewer. The advance rate is the amount lenders are willing to lend, often expressed as a percentage of the vehicle’s sticker price.

The company said nothing about auto leasing in its announcement. Dealers have said GMAC’s withdrawal from leasing has substantially hindered auto sales.

“GMAC now finances a broad spectrum of auto buyers,” Muir said. “Through March, we financed over $2 billion in new and used retail auto contracts. We want to do our part to support the U.S. auto industry and individuals in the market for a car or truck.”

In December GMAC received a $6 billion government bailout that required GM and the private equity firm Cerberus Capital Management LP to slash their stakes in GMAC. GM’s stake was 49 percent and Cerberus’ 51 percent.

GMAC, now a bank holding company with operations in North America, South America, Europe and the Asia-Pacific region, had $189 billion in assets on Dec. 31.

Reuters contributed to this report

All I can Add, It’s about time…

Technorati Tags: floor plan financing, Floorplan Financing, GMAC, Inventory Financing