GMAC Places Tight Reins on Auto Loan Approvals
DETROIT — Late yesterday, GMAC Financial Services announced it has significantly tightened underwriting requirements for its auto loans on an indefinite basis.
More specifically, the changes include limiting purchases to contracts with a credit score of 700 or above.
Additionally, the company reported it will restrict contracts with higher advance rates and longer terms. Last week, the company said it grew the rate it charges dealers for providing non-incentivized consumer auto financing by 75 basis points.
"GMAC Financial Services today (Monday) implemented a more conservative purchase policy for consumer auto financing in the U.S. as a result of the lack of stability in the global capital and credit markets," the company indicated in its statement.
"These changes in pricing and underwriting are related to the current market environment, which has reduced access to funds and increased the cost of funds. The company currently expects these actions to remain in place until the credit markets stabilize and accessibility improves," it continued.
Meanwhile, GMAC's wholesale auto finance business is unchanged by the actions, according to officials.
"The economy continues to force lenders to tighten their loan criteria while consumers are faced with increased difficulty in repaying those loans on time," explained Scott Waldron, president of Experian Automotive, in a recent study by the company.
For June through July of this year, Experian discovered that 23 percent fewer loans financed fell below 739.
"Part of this shift is the result of lenders tightening their credit requirements. During this same period, the percentage of loans that scored 740 and above grew 19 percent," according to the company.
Experian Automotive also recently identified the top 15 auto lenders by market share, then broke the details down further by type.
This AutoCount data indicated that GMAC was No. 2:
All vehicles percentage: 6.2
Total loan percentage: 5.23
New loan percentage: 8.98
Used loan percentage: 2.98
Total lease percentage: 13.01
New lease percentage: 13.46
Used lease percentage: 7.97