GMAC — once known as the General Motors Acceptance Corporation, the financing arm for GM — announced recently some changes that may impact whether you can finance your next car through them or not. In a bid to counter the lack of stability in the financial and credit markets, GMAC is now requiring that all credit applicants have a FICO score of at least 700 in order to qualify for an auto loan.

The move by GMAC comes just a few months after the financing arm of GM (51% owned by Cerberus) said that they were curtailing its automotive leasing business. GMAC, like many automotive financing arms, has been hit hard by the rapid devaluation of big trucks, SUVs, and large cars, a move which has contributed to the financing company’s steep losses this year.

You Can Qualify For A Car Loan

For consumers who still want to finance a new car purchase, the news isn’t necessarily bad, especially for the 75% or so of people who meet the minimum threshold. For everyone else there are some steps that can be taken which can still secure a car loan for them. These include:

Raise Your Credit Score — Unless you must buy right now, you might be better off waiting to purchase a new car until after you work on raising your credit score. Obtain copies of your credit reports and find out what may have caused your score to drop. If the problem is easy to correct — let’s say a mistake is found on your report — your score could be adjusted upwards in as little as thirty days. Otherwise, if you’re behind on loan payments, catch up on those immediately — it’ll take longer to raise your score, but in the end you’ll be glad that you did as your interest rate will decrease.

Arrange Your Own Financing – Banks and credit unions may want to finance your purchase too. Their requirements might be different, spelling the difference between you getting a car now or waiting until later. Remember, the lower your credit score the higher your interest rate will be. Is it worth getting the easier approval only to pay more later?

GMAC isn’t the only automotive financing arm raising their requirements, though they are the most visible one given their sheer size.  Despite what you may be hearing on the news, credit hasn’t dried up completely as it is still very much available to people who have a high credit score.

(Source: GMAC)

One of the big downsides for automakers who provide financing for vehicles through their own financing companies is that these businesses are losing a lot of money. Contributing to the losses is the huge decline in resale values on big trucks and SUVs, vehicles that General Motors, Ford, Chrysler, Toyota, and Nissan have sold in abundance over the past few years.

As a result of current market conditions, GMAC, Ford Credit, Chrysler Financial and other automotive manufacturer’s financing arms are losing hundreds of millions of dollars annually. In a bid to stem losses, the companies are no longer accepting new leases or severely restricting what they can offer. Clearly, one important financing option is no longer available for consumers, though there could be some benefits which are offered instead.

Can’t Lease From The Manufacturer? Other Options Are Available!

For some consumers, losing the lease option means that they’ll take their business elsewhere. For whatever reasons are important them, holding onto a car longer than the typical 24-39 month lease period is not something they want to do. Fortunately, there are some options for consumers to consider:

Take Your Business Elsewhere — Inasmuch as leaving your favorite automotive brand could be a big move for you, if you want to lease a new car every two or three years, then finding a manufacturer who offers this option is one way to go.

Take The Financing Deal Or Shop Around — In a bid to offer customers an attractive alternative to leasing, automotive financing companies are sweetening their deals. Here, you could find additional bargaining power: instead of financing your car through the dealer, take the rebate and seek financing elsewhere. Your credit union can often match the best financing rate out there allowing you to pocket the $2000 to $5000 rebate offered in lieu of financing.

Take Your Leasing Elsewhere — If you would like to continue with your favorite brand (Chrysler, for example) and the manufacturer is no longer offering leases, you can seek third party leasing elsewhere. Your leasing options (higher down payment, bigger monthly payments, other restrictions) won’t be as attractive as what you would have received previously, but this option is still available to you. In some cases you could get a rebate from the manufacturer while leasing your new car with a third party.

Even BMW is rethinking leasing which is 60% of its U.S. business. Though the German automotive company will not be getting out of this business angle completely, it just may pay for you to consider leasing elsewhere and taking whatever other incentives are being offered instead.

Clearly, the consumer is in the driver’s seat as year to date vehicle sales are down by more than 10% this year. Just like in the housing market, if you are a buyer then deals can be had, but carefully weigh every offer to find the best plan for you.