GM Financial ventures into nonprime

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GM Financial has launched a soon-to-be nationwide nonprime retail program for GM dealers in a bid to capture a very large but often neglected segment of Canada’s car buyers.

The program, tested in August with Ontario’s GM dealers, looks to tap into the estimated 3.5 million Canadians with “less-than-perfect credit.” A full rollout started on September 1 with Quebec dealers to be brought on board later this fall.

“Nonprime is a new market, not just for us, but for all of Canada,” said Marc Comeau of GM Canada.

“With close to 20 per cent of Canadians being in the nonprime bucket, GM Financial’s retail product is a big addition to our arsenal of tools. And it’s happening at a time when used vehicles are in short supply. Typically, the nonprime consumer would default to a used vehicle. Now, this gives us the opportunity to put those consumers in new cars, which translates to higher new-car sales for GM Canada.”

Subvention support from GM will mean Canada’s 460 GM dealers can offer customers an attractive interest rate for financing their purchase and that they can market to consumers with a credit bureau score of 680 or below.

“Customers expect a low interest rate; with GM Financial, a near-prime consumer could have an interest rate as low as three per cent.”

The company says terms will be flexible and reflect the current economic needs of Canadians, offering up to 84-month loan terms for new vehicles, and even some lightly used vehicles.

This foray into nonprime retail comes after a successful first half for GM Financial. As of July 31, the captive originated $702,219,782 in prime leases, or 20,592 lease contracts.

And while it has contributed to significant increases in GM lease penetration since entering Canada in April of last year, the competitive environment continues to favour retail loan products.

“Every customer that walks into a GM dealership must be qualified in order to start the car-buying process,” Comeau added. “Prior to GM Financial’s nonprime product, our dealers didn’t have as many options when it came to working with the subprime shopper. But now we have a way to work with that customer, we have a product specifically for them.”

Howard Cobham, GM Financial Canada’s senior V-P of dealer services, said that GM dealers can make very healthy profits through the company’s nonprime program offers.

“Dealers will see more approved deals and ultimately more cars sold. They can also realize strong back end profits from warranty, life insurance and other aftermarket products sales,” he said.

“A near-prime consumer may be able to get zero per cent interest on a new car at another dealership, if they have a large down payment. With the GM Financial program, they can have a significantly smaller down payment with an interest rate as low as three per cent.

According to DesRosiers Automotive Consultants, new and used-vehicle transactions financed for nonprime customers sit at 19.6 per cent and 33 per cent respectively.

Lee Wittick, general manager of Applewood Chevrolet in Mississauga, Ontario, said his dealership averages about 170 deals per month. From that, between 17 and 20 deals a month are rejected due to a customer’s nonprime bureau score.

“About 10 per cent of our deals are declined,” he said, noting that GM Financial’s nonprime retail program will mean another option for those rejected consumers.

“What I like about GM Financial, is that they are there to help structure a deal if needed. Other banks and competitors don’t offer that… I like that this program is just another arrow in the quiver.”

Cobham suggested GM Canada dealers call their reps to find out more.

“We are extremely proud to have introduced this program in Canada. Our Canadian and U.S. teams worked hard to make sure the proven offers within the United States will help our GM dealers here in Canada. Our team members spent months going through the proper training in preparation for working with our GM dealers to help them assist their Canadian nonprime customers.”