GM Ramps Up Risky Subprime Auto Loans To Drive Sales
Here we go again… Relying on loans to people who likely can’t afford them will dig GM into a hole like the housing bubble. Will we have to bail them out again?
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The automaker is relying increasingly on subprime loans, 10-Q financial reports shows.
Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.
GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012.
The worse the FICO score, the bigger the increase. From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion. The second worst category, 540-599, rose 28% from about $3.4 billion to $4.3 billion.
http://news.investors.com/article/620090/201207271807/gm-risky-subprime-auto-loans-fuel-sales.htm
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