So, how good is business for GM Financial? It set a record-low cost of funds last week, paying just 1.5 percent interest on an asset-backed securities transaction.
Dealerships will have to wait and see how much of that lower cost of funds GM Financial chooses to pass along at retail. But inevitably that will help GM Financial compete in the growing subprime market.
It gets more complicated than this, but the net effect is that on Sept. 5, GM Financial announced it borrowed $1.3 billion at only 1.5 percent interest. That beat the company's previous record low of 1.9 percent on an asset-backed transaction in June.
That's a big improvement. During the downturn, GM Financial's predecessor company, independent lender AmeriCredit, paid 7.5 percent in a July 2009 transaction. General Motors bought AmeriCredit in 2010, forming it into GM Financial.
In an asset-backed transaction, an auto lender basically sells off a bundle of loans to investors to acquire funds to make new loans. The net effect is that the lender borrows money from the investors that buy the asset-backed securities. The investors get paid over time, as consumers repay the loans.