GM to Resume Making Subprime Car Loans

subprime

If in doubt, sell your cars to anyone willing to buy them, even if they haven’t demonstrated the ability to pay in the past.

That’s what GM is doing, after sales plummeted 51 percent in the first two months of the year.

The company’s partially-owned financial unit GMAC has announced it will ease auto financing requirements, allowing those with credit scores below 620 to apply for car and truck loans.

Typically, a borrower is defined as subprime if their credit score falls below 620, though a number of other factors serve to make this distinction.

GMAC also plans to cut borrowing costs on new and used vehicle purchases, and has eased a variety of fees and payments imposed on its dealers.

Car dealers have been hit hard by the credit crisis because so-called floorplan financing, or inventory loans, which allow them to hold onto vehicles temporarily until sold, has been frozen since late last year.

United States auto sales fell 40 percent during the first two months of the year to their lowest level in 27 years; and auto sales figures for March aren’t expected to be any rosier.

GM is teetering on the verge of bankruptcy, and could file by early summer if it’s unable to work out a plan with its creditors.

The company has been looking to restructure for a while now, and is expected to sell or shut down its Hummer brand in coming weeks.

Both GM and rival Ford have recently launched car payment protection plans to boost flagging sales, though its too early to tell if such plans will have much impact.