DETROIT - General Motors Co., the automaker 61 percent owned by the U.S. government, is buying subprime lender AmeriCredit Corp. for $3.5 billion to help it provide leases and loans to borrowers with faulty credit records.
Customers with poor credit and the lease market are key areas where GM must grow to accelerate its car sales.
"This helps GM finance less-than-perfect-credit buyers, and God knows there's plenty of them today with economic conditions as they are," said Joe Phillippi of AutoTrends, a consulting firm in Short Hills, N.J.
But the acquisition also means that GM is getting back into the business of making risky loans. The company said it advised the Treasury Department of the acquisition, although government approval was not required.
GM executives have said for months that they were missing sales opportunities due to lack of credit for lease deals and financing for subprime buyers, those with credit scores below 620 on a 300-to-850-point scale. About 40 percent of U.S. customers have below-prime credit scores, said Chris Liddell, GM's chief financial officer.
GM had considered buying back its former lending arm, GMAC Llc, starting a bank or working with outside lenders to offer customers more financing options, three people with knowledge of the discussions said this month. Buying GMAC, now called Ally Financial Inc., or starting an in-house banking unit proved too difficult at that point, they said.
- Combined news services