Thursday, January 22, 2009

GM: Borrowing at 8%, Lending at 0%

ASSOCIATED PRESS (12/30/2008)General Motors said it will offer financing as low as 0% for several 2008 and 2009 models as the automaker makes a big year-end push to improve sales.

The news comes a day after its troubled lending unit, GMAC Financial Services, agreed to take a $5 billion loan from the Treasury Department. GM said it will offer 0% financing for up to 60 months on the 2008 Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X sport utility vehicles through GMAC. The Saab 9-3 and 9-5 sedans also qualify for zero-percent financing. The carmaker is also offering financing between 0.9% and 5.9% on more than three dozen other 2008 and 2009 models, including many trucks and SUVs.

Separately, GMAC said Tuesday that it will offer auto loans to customers with credit scores as low as 621, eliminating restrictions put in place two months ago that required a minimum score of 700.

Quote of the day from Jeff Macke (CNBC Fast Money contributor) via Dennis Gartman's "The Gartman Letter":

"GM has become a company that borrowed money from the U.S. government at 8% and lent it to the American public at 0%. This is not a model we would like to build upon.”

MP: And GMAC lowered credit standards at the same time it offered 0% financing.


At 1/22/2009 9:52 AM, Anonymous Anonymous said...

If GM is lending at 0% in lieu of a rebate, it is not really 0%.

At 1/22/2009 10:08 AM, Blogger fboness said...

What a Dilbertesque business plan: We lose a little on every sale but, we make up for it in volume.

At 1/22/2009 1:36 PM, Anonymous Anonymous said...

I'm pretty sure 'bleeding money like a hemophiliac with his throat cut' was not in the plan they present last month.

I must be wrong.

At 1/22/2009 2:48 PM, Anonymous Anonymous said...

GM has offered 0% financing ever since the attacks of 9/11. That money has never been free. 8% on a $25,000 car is $2,000. For 5 years of payments, this amounts to $10,000. I have wondered for a long time how GM could afford this. Even if GM borrowed money at 4%, you're talking a cost of $5,000.

At 1/22/2009 4:12 PM, Anonymous Anonymous said...

The 0% financing is a myth. The buyer is paying the interest upfront in the purchase price. The IRS imputes a rate to all purchase contracts/leases.

At 1/22/2009 11:23 PM, Anonymous Anonymous said...

Anonymous 4:12
Thanks for the clarification.


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