GMAC Financial Services will close its subsidiary Nuvell Financial Services on March 7, the company confirmed today.
Nuvell mostly wrote retail car loans to subprime customers -- those with risky credit profiles. Nuvell accounted for less than 10 percent of GMAC's retail finance business, said GMAC spokesman Mike Stoller.
For General Motors dealers, Nuvells demise confirms a new reality: They must look outside GMAC to find loans for subprime customers. GMAC stopped funding subprime loans in October, and Nuvell stopped writing new business today.
Last summer, GMAC also slashed its vehicle leasing business to almost nothing by raising lease rates. Stoller said that policy will not change until vehicle sales and credit conditions improve.
Nuvell was essentially out for us some time ago, said Carroll Smith, owner of Monument Chevrolet in Pasadena, Texas.
Nuvells business unit, National Auto Credit Inc., also will close. National funds a mix of prime and subprime retail loans to non-General Motors dealers.
Another Nuvell business unit, American Suzuki Financial Services, provides subvented and standard retail loans and leases to Suzuki dealers through a contract with American Suzuki Motor Corp. American Suzuki Financial Services does not finance Suzuki dealers vehicle inventories.
The business arrangement with Suzuki will continue under GMAC Financial Services, and the transition began today, said Stoller.
Of Nuvell's 348 employees, 136 will take jobs with GMAC and the other 212 will be laid off, he said.
After receiving federal aid last month, GMAC loosened its credit standards to serve a broader spectrum of consumers. The company lowered its minimum credit bureau score to 621 from the 700 minimum score it adopted two months ago. That 621 score is considered the cutoff for prime customers -- people with good credit -- said Stoller. He added: Prime customers are our core business.