Scrounging for Sales, Chrysler, GM Target Sub-Prime Buyers
By Michelle Krebs May 21, 2010To paraphrase Jerry Seinfeld: not that there's anything wrong with having a less-than-exemplary credit rating.
To the contrary. With new-vehicle sales stumbling along to the dissatisfaction of just about every automaker, buyers with dinged credit are going to find themselves a lot more popular on dealer lots these days, particularly now that wards of the state Chrysler Group LLC and General Motors Co. are publicly whining that they're not getting their fair shot at customers with sub-prime credit.
Chrysler is the first to do something about it, teaming starting today with Spanish bank Banco Santander's U.S. arm, Santander Consumer USA Inc., to expand availability of sub-prime financing. The deal appears to be an avenue for undercutting Chrysler's primary partner, Ally Financial Inc. (formerly GMAC Financial), which thanks to giant losses in the sub-prime mortgage market, apparently is taking a conservative approach to sub-prime auto loans.
Reports Thursday said Santander Consumer may be able to offer sub-prime buyers loan rates as much as 30 percent lower than competitors. Including, presumably, Ally.
Meanwhile, GM North America president Mark Reuss indirectly said earlier this week GM's reliance on Ally - it funds about 30 percent of GM loans - is one reason the automaker is almost completely uncompetitive for sub-prime customers. Only 1 percent of GM's auto loans and leases go to sub-prime buyers. At rival American Honda Motor Co. Inc., about 20 percent of its financed auto sales go to sub-prime customers.
Sub-prime buyers also account for about 20 percent of Chrysler's sales - and the automaker says its linkup with Dallas, Texas-based Santander Consumer could translate to another 2,000 monthly sales, which, based on April figures, is about 2 percent of Chrysler's total.
A Chrysler spokesman said its new linkup with Santander Consumer is not the result of Ally's reluctance to finance sub-prime buyers; unsaid, however, is the likelihood Chrysler is losing sales because of Ally's sub-prime rates.
Although GM sold most of its ownership stake in Ally when the company was still known as GMAC Financial, GM still retains a 9.9-percent stake in Ally. Could that be limiting GM's aggressiveness in pursuing an alternative lender for sub-prime business?
A GM spokesman would say only that the company is not in discussions with Santander Consumer.
New figures released this week by credit agency Experian showed only about 1.9 percent of all auto loans were in default in April. - Bill Visnic, Senior Editor
LEAVE A COMMENT
So the companies that produce some of the lowest quality cars need to market them to people with lower credit scores.
when will these companies ever learn. turning people into debt slaves is not the answer to a healthy, strong economy. what will it take to return to normalcy? maybe another market crash?
Jersey Cars
http://www.jerseycarcash.com
jmess-Toyota will finance you with a 620 Fico score, so i guess that they make lower quality vehicles than GM or Chrysler. Also notice that 20% of Honda buyers are sub prime.
ADD A COMMENT