If You Have Bad Credit, You May Be In Luck.

General Motors needs to expand their sales

General Motors needs to expand their sales. And doing so may require them to become more aggressive when it comes to securing subprime loans for their buyers. The subprime market is an excellent place for GM to go buyer hunting. After all, it is a huge segment of the U.S. auto market. "By not financing [subprime] consumers, they are locking out about 40% of the U.S. population," said Melinda Zabritski, director of automotive credit for Experian Automotive in an article by Wall Street Journal writer Sharon Terlep.

Even though GM has increased their sales compared with last year, they are still falling behind the pack. Ford, their rival accross town has already experienced sales increases over 30 percent. This trend continues with most other manufacturers, including Honda and Toyota, who are showing bigger sales increases as well. And what about the subprime market? All three GM rivals are doing much better.

GM does have a severe barrier to subprime lending though. Their rivals, Ford, Honda, and Toyota own their respective lending arms. Attracting more buyers is easy. When sales slump and they need a boost, they just demand the lender to relax their approval requirements a bit. GM can't do this.

In 2006, when GM was in need of cash, they sold 51 percent of GMAC to a private organization led by private equity firm Cerberus Capital Management LP. This group ran into struggles of their own with subprime mortgages in 2008 and was bailed out by the government. The federal government now owns 56 percent of Ally Financial, Inc., formerly GMAC, and 61 percent of GM.

Since GM doesn't own Ally, they cannot demand relaxed lending requirements to boost sales. However, they are a bit boot-strapped because the Government has named Ally as GM's primary lender. Almost 40 percent of GM's total sales are financed through Ally.

Will GM start another lending division? Recently, they studied the idea. But all indicators now point to the fact that, for the foreseeable future, GM has no plans to undertake the task of opening its own finance company or trying to regain control of GMAC.

If that is the case, what do they plan to do? GM spokes woman Renee Rashid-Merem stated, "We are developing relationships with other financial sources on a selective basis for specialized financing needs, such as leasing and subprime financing," in an article by Ken Thomas of the Associated Press. This could be really good news for you if your credit score is below 620, or subprime.

GM needs more business. The company is looking to expand their subprime lending sources according to a statement made last month by Mark Reuss, their North American president. This is perfect news for the millions of car shoppers with subprime credit who would like to buy a new car. If you think your credit might prevent you from owning a new car, never fear, GM is trying to find a way to get you into the driver's seat.

by: David Ruebush

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