Dealerships can lose their entire finance profit when cars are repossessed, under the retail finance agreements that GMAC Financial Services is issuing to Chrysler LLC dealers.
Normally, automotive lenders set aside 25 to 30 percent of the dealerships finance profit to cover defaults. The store keeps the rest of the profit as long as the loss occurs after 90 days.
In keeping with standard industry practice, GMAC is withholding 25 percent of the finance profit upfront. But it also will charge back the rest of the profit later if the vehicle is repossessed, the National Automobile Dealers Association warned in a dealer advisory.