Car dealers demand more cash for down payments
LOS ANGELES -- Buying a new car?
Bring some extra cash.
Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan.
The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago, Edmunds.com reports. That's the highest average down payment since the car-buying research site began tracking the number in 2002.
Lenders are pulling back on how much of the transaction price they'll finance, cutting their risk and requiring buyers to fork over more cash.
"Banks are a lot more stringent," says Jesse Toprak, a senior analyst for Edmunds. He advises buyers to get a loan approval before heading into showrooms so they won't be in a weakened position in price negotiations.
The average loan in August accounted for 88% of the car's value, down from 95% in July, says RDQ Economics.
The latest credit clampdown came this week from GMAC Financial Services, co-owned by General Motors and Cerberus Capital Management, which owns Chrysler.
GMAC is pulling back from financing extras besides vehicle purchase price, such as accessories, sales taxes, extended warranties or remaining debt on a trade-in vehicle. It also required that borrowers have credit ratings of 700 or higher.
Toyota Financial Services has taken a similar approach to extras, says spokeswoman Kerry Rivera, and retreated from deals in which it was lending up to 110% of a new vehicle's price.
Chase Auto Finance started cutting back high-loan-to-value deals last year. "The concern on some of these deals is making sure it's affordable for the consumer," says Chase spokeswoman Mary Kay Bean.
Tighter lending and forcing customers to have more cash is hampering automakers' attempts to revive battered sales.
To fight back, GM today begins a new ad campaign themed "Financing that Fits," aimed at luring customers who might be deterred by the financing issue.
Besides connecting buyers with a wider array of lenders, GM has revised incentives to help buyers with down payments, says spokesman John McDonald. As a result, "bonus cash" on a Saturn Aura sedan — a rebate that can be used as a down payment — is $2,000 starting this month, up from $1,250.
