General Motors recently announced that it will pay $3.5 billion to purchase AmeriCredit, a company that specializes in bad credit auto loans. But what does this mean for car buyers?
According to USA Today, the move could mean that buyers with less than stellar credit may be finding themselves behind the wheel of a GM vehicle soon.
Melinda Zabritski of Experian said that 40 percent of car buyers fall into the range of bad credit and moderate credit. Those buyers will now have another source with which to acquire auto loans, she said. Although subprime lending in the mortgage industry was a contributing factor in the financial collapse, the practice is vital to the auto industry, as it allows those with bad credit to purchase vehicles.
“If managed properly, lending to non-prime and subprime customers can be a source of profitability for automakers, retailers and lenders,” Zabritski says.
GM has said that its previous lack of a financing arm hurt its ability to compete with other companies that were offering car loans to buyers with bad credit. Once the deal goes through in the fourth quarter, the automaker will be able to arrange its own financial packages once again.