If You Have Bad Credit, You May Be In Luck.

General Motors needs to expand their sales. And doing so may require them to become more aggressive when it comes to securing subprime loans for their buyers. The subprime market is an excellent place for GM to go buyer hunting. After all, it is a huge segment of the U.S. auto market. "By not financing [subprime] consumers, they are locking out about 40% of the U.S. population," said Melinda Zabritski, director of automotive credit for Experian Automotive in an article by Wall Street Journal writer Sharon Terlep.

Even though GM has increased their sales compared with last year, they are still falling behind the pack. Ford, their rival accross town has already experienced sales increases over 30 percent. This trend continues with most other manufacturers, including Honda and Toyota, who are showing bigger sales increases as well. And what about the subprime market? All three GM rivals are doing much better.

GM does have a severe barrier to subprime lending though. Their rivals, Ford, Honda, and Toyota own their respective lending arms. Attracting more buyers is easy. When sales slump and they need a boost, they just demand the lender to relax their approval requirements a bit. GM can't do this.

When they needed cash in 2006, GM sold 51 percent of GMAC to a private group led by Cerberus Capital Management LP, a private equity firm. In 2008 this private firm ran into their own troubles with subprime mortgages and required a government bail-out. Now, the good 'ole USA owns 61 percent of GM and 56 percent of Ally Financial, Inc., or what used to be GMAC.

Since GM doesn't own Ally, they cannot demand relaxed lending requirements to boost sales. However, they are a bit boot-strapped because the Government has named Ally as GM's primary lender. Almost 40 percent of GM's total sales are financed through Ally.

So the question becomes, will GM start another finance company? They did look into the idea a few months ago. However, research now shows that, for the near term, the company does not plan to open a lending arm or try to take back control of GMAC.

If that is the case, what do they plan to do? GM spokes woman Renee Rashid-Merem stated, "We are developing relationships with other financial sources on a selective basis for specialized financing needs, such as leasing and subprime financing," in an article by Ken Thomas of the Associated Press. This could be really good news for you if your credit score is below 620, or subprime.

We know GM needs a sales boost. Their North American president, Mark Reuss, was quoted last month saying the company wants to expand their subprime lending power. So, the millions of car buyers with less than perfect credit scores, who are looking for a new car, may be in luck. If you fall into the class of shoppers who worry their credit may block them from owning a new car, don't worry, GM may soon have a vehicle and lending that is perfect for you.

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