GM offers financing to subprime buyers

In an effort to boost sales, the automaker targets buyers with less-than-perfect credit.

By Benzinga Aug 2, 2012 1:37PM
By Joe Young

General Motors (GM) will continue efforts to increase vehicle sales and is expected to release another purchase program for buyers with low credit scores.

This same program was introduced back in 2010 after General Motors purchased AmeriCredit Corporation for $3.5 billion in an effort to gain access to subprime buyers. At the time, General Motors didn't have the same access to subprime lending as other companies like Honda (HMC) or Toyota (TM), and subprime buyers only made up about 1% of total GM vehicle sales, versus 20% of Honda sales.

General Motors' subprime buyers have grown to more than 8% since the purchase of AmeriCredit, and now the carmaker is about to release the program again. Vehicles included in the promotion are likely to include 2012 models of the Chevrolet Malibu, Cruze and Silverado. Should the program follow the same guidelines as it did in 2010, annual percentage rates (APRs) will be near 12%, with money down for buyers with a credit score lower than 650.

General Motors showed soft vehicle sales during the second quarter of 2012, reporting only modest growth of 1.4% from the year-ago period (falling far below analyst expectations of 11%).

According to JPMorgan, brand-specific vehicle sales showed Chevrolet sales up 1%, Cadillac up 31%, Buick down 8%, and GMC down 1%. Since the program is aimed mostly at budget-priced Chevrolet, General Motors may hope to see sales grow akin to Cadillac's numbers.

General Motors has been in the news regularly over its management changes, vehicle sales, new partnerships and its "Chevrolet Confidence" program, which offers haggle-free pricing on all 2012 model Chevrolets through September 4. All 2012 to 2013 model Chevrolets will be sold with a money-back guarantee of 30 to 60 days after the sale, with less than 4,000 miles. This program was unveiled previously in 2009.

But the automaker has managed to avoid news of recalls, unlike Ford (F), Honda and Toyota. So perhaps "Chevrolet Confidence" has meaning for both buyers and the seller. General Motors stated that there will be no change to its current marketing strategy, according to The Detroit News. Understudy Global Chief Marketing Officer Alan Batey announced Wednesday that the company will continue to moving forward, despite the departure of marketing guru Joel Ewanick.

More from Benzinga

Aug 2, 2012 2:13PM
Wait.... Offering credit to people who most likely can't pay it back... Doesn't this sound familiar? (credit bubble cough cough)
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