GMAC wants only top-rated borrowers; Ford wants to make loans

GMAC is limiting financing to borrowers with the best credit. The finance company, now 51 percent-owned by Chrysler’s parent company, Cerberus Capital Management, announced it would offer loans only to customers with a credit score of at least 700. About 58 percent of Americans fall in that category, but current economic conditions are having a deleterious effect even on many who were rated prime in the past. The move may have a negative impact on retail sales of GM vehicles which are already down 17.3 percent this year.

“The decision was made as a result of the instability in the capital and credit markets,” said GMAC’s New York-based spokeswoman, Gina Proia. “In order to prudently manage our business, we had to make some changes to prices and underwriting.”

In the second quarter of 2008, GMAC granted loans to buyers of 298,000 GM vehicles in Canada and the U.S. That figure represents about 43 percent of GM’s second-quarter auto loans.

GMAC yesterday also raised the rate it charges dealers for making loans that aren’t part of a special incentive program and said most new loans will be limited to 60 months.

In the meantime, Ford Credit, which sold its sub-prime financing business some years ago and never entered the mortgage market, is trying to reach out to prospective customers and let them know it has money and it is offering loans and leases to customers with “decent” credit.

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