GM: Saved by zero?

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It didn’t take long for the government bailout of GMAC to filter down to the car lot.

General Motors Corp., which has long relied on GMAC to provide financing for many of its customers, said today it would offer zero-percent loans on a handful of vehicles and below-market rates on financing for several other models.

The announcement came the day after the federal government said it would provide $5 billion in financial aid to GMAC, which had virtually ceased making auto loans over the last several weeks as a crushing debt load threatened to push it into insolvency.

With the federal rescue money on the way, GMAC said it would loosen its credit standards so that more buyers could qualify for loans. GMAC, which earlier had said it would only provide loans to buyers with credit scores of 700 or above, said it would now accept credit scores above 620.

All of which is welcome news to GM dealers, who are battling the worst sales slump in the U.S. auto market since the early 1980s.

“This is something we’ve been watching and waiting for,” said Mark Parkinson, owner of Tustin Buick Pontiac GMC Hummer.

Normally, 50%-60% of Parkinson’s customers get their loans through GMAC. But during November, almost no sales were financed through the lender. “After they tightened their credit criteria, no one could qualify,” he said.

Parkinson said sales began to tick up in December after the Bush administration agreed to provide a $17.4-billion bailout for GM and Chrysler. The looser credit standards at GMAC and GM’s special financing offers should help even more.

“It’s not like a year ago, but it’s the first positive uptick we’ve had in a while,” Parkinson said. “Customers who have been coming in for the last couple of months and just looking are now buying cars. That’s a good sign.”

Whether it lasts is another matter. The Conference Board reported today that consumer confidence in the U.S. fell to the lowest level since the group began keeping records in 1967. While not always a direct gauge of consumers’ willingness to spend money, the confidence reading -- with the stock market down, housing prices falling and the economy in recession -- could bode ill for car dealers, said Greg McBride, senior financial analyst at Bankrate.com.

Even with a zero-percent loan, a $30,000 car purchased with no money down and paid off over five years results in a hefty $500 monthly payment. If financed at the 7.05% current national average rate for auto loans, the payment would be $594 a month, McBride said.

“With the fragile state of consumer confidence and the dim prospects for the job market, a lot of consumers aren’t going to look at it as saving $90 a month in interest,” he said. “They’re looking at it as how confident are they that they can carry an additional $500 a month in debt.”

Many of the juiciest deals are on big SUVs like the Chevy TrailBlazer and GMC Envoy. McBride questioned whether those offers would hold attraction for consumers with fresh memories of paying $4.50 for a gallon of gas. But with pump prices now well below $2, shoppers are showing a renewed interest in big pickups and SUVs, Parkinson said.

Here are the details of GM’s new financing offers, which are available through Jan. 5:

2008 model year vehicles and offers:
0% APR for up to 60 months on Chevrolet TrailBlazer; GMC Envoy; and Saab 9-3, 9-5, 9-7X
0.9% APR for up to 60 months on Buick Lucerne
1.9% APR for up to 60 months on GMC Yukon and Yukon XL; Chevrolet Tahoe, Suburban and Avalanche; Cadillac CTS, SRX, Escalade, DTS, STS and XLR
2.9% APR for up to 60 months on Buick Lacrosse; Hummer H2 and H3
3.9% APR for up to 60 months on Chevrolet Equinox, Colorado Ext and Crew cab and Light Duty Silverado; Pontiac Torrent; GMC Canyon Ext and Crew cab; and Light Duty Sierra
4.9% APR for up to 60 months on Saturn Astra and Sky; Pontiac Solstice; Chevrolet Corvette and Heavy Duty Silverado; and Heavy Duty GMC Sierra

2009 model year vehicles and offers:
3.9% APR for up to 60 months on Chevrolet Cobalt; Pontiac G5; and Cadillac CTS
4.9% APR for up to 60 months on Pontiac G6; Chevrolet Malibu, Light Duty Silverado and HHR; Saturn Aura; and Light Duty GMC Sierra
5.9% APR for up to 60 months on Chevrolet Avalanche and Heavy Duty Silverado; and Heavy Duty GMC Sierra.
Many of the vehicles listed have bonus cash and/or dealer cash ranging from $500 to $4,250.

It’s not clear yet whether GM’s competitors plan to match these offers.

-- Martin Zimmerman