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, GMACs SmartBuy program will be discontinued.
Effective Sept. 1, wholesale financing rates will rise by a minimum of 0.5 percentage points.
Stokels 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 GMACs health, but if you add it up, its going to cost the dealer something on your bottom line.
Its 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, theyll be the first ones to reduce the costs. They always are. My guess is theyll stay in leasing, but itll 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 companys 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.
Weve 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 were taking today are prudent and yet still make GMAC financing an attractive alternative.