Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.
Subprime Key Driver
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.Let me think...What is it about GM that makes it different from other companies? It couldn't be that it is largely owned by the federal government and the United Auto Workers, could it? No, the government would never allow such a thing to happen after the mess we had in 2008. And I'm pretty sure that a government-owned company would never use subprime lending to juice sales prior to an election in which two key auto-producing states, Michigan and Ohio, are up for grabs.
Besides, the government can surely be trusted to make sure that TARP recipients (GMAC, $12.5 billion; GM, $40 billion; and GM suppliers, $3.5 billion) don't ever put the economy at risk again.
I guess it will remain a mystery.