In yet another sign that the credit crisis is strangling the auto finance sector, GMAC yesterday announced that it would only lend to borrowers with a credit score of at least 700. Full coverage of the news is available here.
GMAC is 51% owned by Cerberus Capital Management. Cerberus also owns 80% of Chrysler, including its captive financing operation. Chrysler earlier this year stopped originating leases.
There was no word on how the decision by GMAC would impact its 2005 agreement with Bank of America Corp., in which BofA agreed to purchase $55 billion of auto loans from the captive financier through 2010.
Wow — that kind of credit score cutoff will severely limit GMAC’s originations. Granted, the article says that the restrictions will only remain in place “until credit markets stabilize,” but at this rate, that could take months.
I did a quick search of a $1.2 billion deal issued May 6 — and here was the breakdown of Fico scores:
Business Accounts and Unavailable . . . 12.73%
Less than 600 . . . . . . . . . . . . . . . . . . . . . 3.63%
600-625 . . . . . . . . . . . . . . . . . . . . . . . . . 4.38%
626-650 . . . . . . . . . . . . . . . . . . . . . . . . . 9.51%
651-675 . . . . . . . . . . . . . . . . . . . . . . . . . 10.75%
676-700 . . . . . . . . . . . . . . . . . . . . . . . . . 10.32%
701-725 . . . . . . . . . . . . . . . . . . . . . . . . . 10.03%
726-750 . . . . . . . . . . . . . . . . . . . . . . . . . 8.47%
751-775 . . . . . . . . . . . . . . . . . . . . . . . . . 7.58%
776-800 . . . . . . . . . . . . . . . . . . . . . . . . . 7.81%
801-825 . . . . . . . . . . . . . . . . . . . . . . . . . 8.65%
826-850 . . . . . . . . . . . . . . . . . . . . . . . . . 4.89%
851-875 . . . . . . . . . . . . . . . . . . . . . . . . . 1.14%
876-900 . . . . . . . . . . . . . . . . . . . . . . . . . 0.11%
Essentially, half of the Ficos were higher than 700. If GMAC cuts out all those loans that fall below the 700-Fico mark, it will be a much smaller lender pretty quickly.