GMAC raises floorplan rates, reduces lease programs

DETROIT -- In a July 31 letter to General Motors’ dealers, GMAC Financial Services said it is raising interest rates for dealer floorplan financing and boost consumer financing rates.

The increases will affect consumer leases and purchases of new and used vehicles.

GMAC also is working with GM to reduce the number of U.S. leases in which GM offers a rate below the standard rate.

“GMAC is taking steps to align its financing program to changing market conditions,” says Sue Mallino, a GMAC spokeswoman.

“These steps include suspending incentivized leasing in Canada, reducing the volume of new lease originations in the U.S., discontinuing the SmartBuy balloon contract program and increasing our pricing on other lending activities such as wholesale dealer financing.”

Mallino declined to say how much GMAC wants to boost prices and decrease leases, but she confirmed that a letter was sent by Barbara Stokel, GMAC’s executive vice president of North American operations, to GM dealers in the United States and Canada.

Details from the letter

Automotive News obtained a copy of the letter that outlined these changes:

• Effective Friday, Aug. 1, all leasing in Canada in which GM offers a rate below the standard rate will be suspended. GMAC will continue to offer leases in the United States to qualified customers, but it is working with GM to reduce the volume of below-standard-rate leasing. Mallino would not say by how much GMAC wants to reduce it.

• Effective Aug. 1, GMAC standard rates for new and used vehicles for purchase, lease or SmartBuy will increase. SmartBuy is a vehicle purchase with a leaselike option to return the vehicle at the end of the term.

• Effective Oct. 1, GMAC’s SmartBuy program will be discontinued.

• Effective Sept. 1, wholesale financing rates will rise by a minimum of 0.5 percentage points.

‘Difficult actions’

Stokel’s letter says these are “difficult actions for both GMAC and our dealer customers, but they are necessary to help preserve the availability of competitive financing options offered by GMAC now and in the future.”

One dealer noted that these moves are necessary for GMAC’s health, but if you add it up, it’s going to cost the dealer “something on your bottom line.”

“It’s difficult to pass these costs on to your customer,” the dealer says. “GMAC was the last one to do any adjustments to any program, and when things improve, they’ll be the first ones to reduce the costs. They always are. My guess is they’ll stay in leasing, but it’ll be more expensive.”

GMAC lists high gasoline prices, poor auto sales and deteriorating vehicle residual values as reasons many lenders are taking similar actions.

GMAC posted a net loss of $2.48 billion in the second quarter. It posted a $293 million profit in the second quarter of last year.

The company’s automotive finance business lost $717 million in the second quarter, largely because of $716 million in write-downs related to its North American leases. GMAC said the write-downs were due to the falling residual value of leased trucks and SUVs. New-vehicle financing also was down in the second quarter.

“We’ve tried to take an approach that is appropriate for GMAC and continuing to support our business and support our dealer customers,” Mallino says. “We feel the actions we’re taking today are prudent and yet still make GMAC financing an attractive alternative.”

You can reach Jamie LaReau at jlareau@crain.com

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