Auto dealers are using rebates, discounts, and other incentives to lure buyers back into their showrooms. But once they get customers through the door, dealers are still battling an issue that has troubled the industry for months: a lack of financing.
Brandon Schaefer, the owner of Nationwide, a string of dealerships in Timonium, Maryland, says foot traffic has improved, but lending has not. "About twice as many people as before are getting turned down for loans," he says. "The guidelines continue to get stricter."
Some lenders have said in recent months that they would try to cut more deals. After GMAC received TARP money in December, the auto lender — reborn as a bank — announced plans to set aside $5 billion for new contracts and promised to consider applicants with credit scores as low as 621. But despite having lower standards, GMAC still originated just $3.4 billion worth of loans for new vehicles in the first quarter, down from $13.1 billion in the same period last year.
Spokesperson Michael Stoller says the bank lowered its bar again this spring. "We want dealers to send business our way," he says. "We’re looking at applications from customers with scores below 620."
Of course, looking isn’t approving. Jeffrey Knott, a Florida based dealership consultant, says one of his customers received a rejection from GMAC a few days ago despite having a FICO score of 652. Though Knott says GMAC is "working harder than other banks" to improve the situation, situations like these persist: "Getting loans is still the number one problem for auto dealers right now," he says.
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