Topic: GM Buys Lender AmeriCredit for $3.5 Billion

[Weexy]

This should help move a few more Cruze's...

"GM is buying subprime lender Americredit Corp for $3.5 Billion to help it reach more customers with leases and loans to borrowers with faulty credit records...


http://noir.bloomberg.com/apps/news?pid=20601087&sid=aJkGAJ6PGK08&pos=3#

[articsteve]

40% of Americans are subprime used car buyers.  Government Motors will make more money from this than their NA manufacturing.

We subprime with TD at 28.9%.  Nice eh? 

[dougjp]

I saw this in the news earlier, and it made me sad. This is the start of the same mindset and activity that caused the economic problems and our huge deficits due to billions of mindless give-aways in the first place.

The politicians must love it though, as long as they can "distance themselves" from the topic. They, like many Americans, feel spending over their means and excessive borrowing is a birthright, that actually not only benefits their "I want it now, regardless" thinking, but produces improved short term economic growth. In other words, as long as it fools the people until after the next election. Sure it again increases a problem that isn't even solved yet. However anything to put off until tomorrow what should have been fixed today, even if the problem is going to be way bigger because of today's decisions (to lend sub-prime).

[tenpenny]

It shows that, despite all the talk, GM's management is exactly the same, doing exactly the same things.

[rrocket]

It shows that, despite all the talk, GM's management is exactly the same, doing exactly the same things.

It sorta seems that way.  Was AmeriCredit bailed out by TARP as well?

[articsteve]

It shows that, despite all the talk, GM's management is exactly the same, doing exactly the same things.

This sub prime business is not to be confused with the sale of new vehicles.  Sub prime financing on used inventory makes a fortune.  Currently that money is going to third party lenders.   GM is now going to cut those third parties out and take that profit for themselves.

It's either get that sub prime business or go out of business in the USA.


If you think "sub prime" is bad *ss,  then check out "TITLE LOANS".  That's where you fork over title to your vehicle in exchange for 50% of it's "wholesale" value.  Repayments begin at 3% per month.  God only knows what the rates can go to.

Harponi and Flaherty managed to sneak in 35 year mortgages before that inevitably fell apart.  Don't know if they'll give Canadians a crack at "Title Loans".  Maybe that will take a majority.   

[Turbo Bob]

Now more rednecks can afford GM, yay! 

Soon they will announce they'll be buying some sort of military off-road division and will start a new SUV craze...

[dougjp]

Now more rednecks can afford GM, yay! 

Soon they will announce they'll be buying some sort of military off-road division and will start a new SUV craze...

And call it "Bummer". 

[Turbo Bob]

Ha ha!

[Erik]

Looks like GM is hoping to increase its sales in the sub-prime market (500-650 credit scores) from 4% to 5%. Seems like a  rational plan to me, as 40% of the American population has sub-prime credit scores right now, following the meltdown of the US economy in 2008. 

[Erik]

It shows that, despite all the talk, GM's management is exactly the same, doing exactly the same things.

It sorta seems that way.  Was AmeriCredit bailed out by TARP as well?

I took a quick look and didn't see any indications that they received any TARP funds.

[Winklovic]

Damn, I knew I should have offered more than $3.4B.

[No H2O]

I saw this in the news earlier, and it made me sad. This is the start of the same mindset and activity that caused the economic problems and our huge deficits due to billions of mindless give-aways in the first place.

The politicians must love it though, as long as they can "distance themselves" from the topic. They, like many Americans, feel spending over their means and excessive borrowing is a birthright, that actually not only benefits their "I want it now, regardless" thinking, but produces improved short term economic growth. In other words, as long as it fools the people until after the next election. Sure it again increases a problem that isn't even solved yet. However anything to put off until tomorrow what should have been fixed today, even if the problem is going to be way bigger because of today's decisions (to lend sub-prime).

How true.

[Erik]

Wow. Some huge conclusions being jumped to here.

There is nothing wrong with lending to the sub-prime market. Yes, the risks are higher, but the lenders also charge a much higher interest rate to help offset the higher risk. It was not the more traditional sub-prime lending that brought the market down. It was rather the fact that the sub-prime  market exploded out of all control in 2006-2007, with over 20% of the market being sub-prime.

4-5% of their sales into the sub-prime market does not seem like a huge risk to me.

[Ontariodriver]

I thought they were broke. I guess they keep spending the bail out money. Got to spend money to make money.

[neil]

Wow. Some huge conclusions being jumped to here.

There is nothing wrong with lending to the sub-prime market. Yes, the risks are higher, but the lenders also charge a much higher interest rate to help offset the higher risk. It was not the more traditional sub-prime lending that brought the market down. It was rather the fact that the sub-prime  market exploded out of all control in 2006-2007, with over 20% of the market being sub-prime.

4-5% of their sales into the sub-prime market does not seem like a huge risk to me.

Right.  These aren't NINJA loans that caused the problems in '08.  The may be subprime, but the criteria for qualifying is often quite a bit more stringent than prime loans.  Proof of income primarily, with job stability a strong secondary consideration.

Interest rates are like insurance premiums.  Does it also make you sad that people who have had a few speeding tickets pay more for their car insurance?  When I close deals to "non-prime" customers I often explain it this way.  If they have no credit, I use a true to life story of me buying insurance on my first house.  They had no idea if I was a pyromaniac or not, so I paid a lot more then than I do now that I have a good clean record.  Same for Interest rates.  If the customer has poor credit I use the same story, and add, "well, you've had a couple fires."

As for Americredit, they pulled out of Canada twice in the past 8 years, most recently about 8 months before the meltdown.  They knew it was coming, and retrenched hard in their core market, thus avoiding TARP.

[Erik]

I thought they were broke. I guess they keep spending the bail out money. Got to spend money to make money.

 

[dougjp]

Glad to see there is so much opposition growing to this.

If I was an American, after being shafted (again) and seeing "my" money potentially being spent for this rather than paying me back, I'd never deal with them again. Same thing here. Its "highway robbery", and its high time these bandits paid for it where it hurts, NO sales.

A very good article; 

http://www.thetruthaboutcars.com/gms-americredit-deal-awaiting-approval/

[No H2O]

Wow. Some huge conclusions being jumped to here.

One thing is for sure, there are a lot of shady deals happening in the US financial sector where a select few gain and many poor souls end up with no shirt on their backs.

I was just reading up on the Greek debt issue...sure enough...the US financial arm had their fingers in that pie as well..."How Goldman Sachs Helped Greece to Mask its True Debt".

http://www.spiegel.de/international/europe/0,1518,676634,00.html

http://www.nytimes.com/2010/02/14/business/global/14debt.html

[Erik]

Wow. Some huge conclusions being jumped to here.

One thing is for sure, there are a lot of shady deals happening in the US financial sector where a select few gain and many poor souls end up with no shirt on their backs.

I was just reading up on the Greek debt issue...sure enough...the US financial arm had their fingers in that pie as well..."How Goldman Sachs Helped Greece to Mask its True Debt".

http://www.spiegel.de/international/europe/0,1518,676634,00.html

http://www.nytimes.com/2010/02/14/business/global/14debt.html

On that we are in complete agreement.

 Sadly, the US government should have come down hard on their banking industry and put some regulations with real teeth in place. Of course, the money moving business is way too powerful for that now.