We’ve just received a copy an email sent by Ford’s Todd Lamb to dealers in his sales district. The missive from The Blue Oval Boy to FoMoCo’s Texas and Oklahoma dealers contains good news for beleaguered stores in the Lone Star and Sooner states. The automaker is reducing its wholesale floorplan rates by .5%. The move is in stark contrast to GMAC’s moves back in August, when the lender raised floorplan rates for GM stores by the same amount. At the same time, Ford’s decided NOT to raise their lending standards. “Unlike GMAC which announced that it will no longer finance customers with credit scores lower than 700, Ford Credit will maintain its’ [sic] consistent financing standards.” Will this offer Ford a competitive advantage? Probably not. But Lamb is nothing if not an optimist: “There’s plenty of reasons to be positive!” If you’ve got a second, we’d love a list, Todd. Full email after the jump.
Subject: Lower Floorplan Rates and No Change in Financing Standards
Good News for Ford and Lincoln Mercury Dealers!
1) Wholesale flooring rates will decrease .50% effective October 14.
2) Unlike GMAC which announced that it will no longer finance customers with
credit scores lower than 700, Ford Credit will maintain its’ consistent
financing standards.
Repeat – Ford Credit will not be tightening its financing standards. This
includes supporting both retail financing and leases of Ford products to
meet the needs of your customers.
3) Ford Credit is focused on driving your customers back to your dealership.
The Step ‘n Tier Up Program is driving customer loyalty by granting
eligible, approved returning Ford Credit customers the next better tier’s
buy rate.
Let’s take advantage of these selling and financing tools today!
There’s plenty of reasons to be positive!
Share the good news with your customers!
Todd Lamb
DSCT DAM – Texas and Oklahoma
Smart move…why having higher standards if the government will bail you out anyway?
“There’s plenty of reasons to be positive!”
There’s There are plenty of reasons…
Gawd!
What the heck is a wholesale floorplan rate? Does Ford charge the dealership per sq ft of showroom space?
Otherwise known as “Last Man Standing”.
The elephant in the room, though, is Toyota’s doing the much the same thing. This would have worked well against GM and Chrysler, but against Toyota’s deep pockets?
All I can think of is that they’re playing chicken with General Motors and/or Chrysler and betting they can outlast them. If–big if–Ford can remain solvent longer, this looks like a sound, if painful, move.
sean, it is a measure of how many dollars a store generates per square foot of floor space. In the gearhead world, sometimes it is hard to remember that car companies exist for one reason: to make you part with your money.
That said, GM will have a VERY hard time selling to people with more than 700 FICO score.
sean – The floorplan rate is the interest rate the dealer pays on the car while it’s on the lot. Dealers don’t buy the cars from corporate and then sell them. They just pay interest (usually pretty high) on the car while it’s on the lot. Once the car is sold, then they pay the manufacturer for it. That’s why they’re usually very happy to get a car off the lot, it lowers their interest payments.
Floorplan rate is an industry term for the interest rate charged on vehicle inventory.
The dealers borrow money to pay for the cars while they sit on the lot. So the floorplan refers to the vehicles using the floor, not the floor itself.
To my knowledge Ford still fully owns its financing arm, which gives them a bit of an advantage.
Cerberus owns a majority stake in GMAC, which means that GMAC is being run to try to make profit, not to move metal.
Even more, Cerberus owns Chrysler, which actually creates a huge conflict of interest.
It seems like it has gone unmentioned that Cerberus might be tightening down on GMAC lending in part to help Chrysler.
I may have to contact the Times as an unnamed inside source and start that rumor.
Well, Ford Credit is also in MUCH better shape than GMAC. They’ve managed their debt well and have close to the right leveraging to get them through this mess. GMAC is still dealing with the fallout from its mortgage business.
Dealers, just like customers, get loans from Ford Credit (GMAC, Toyota Financial, Chase, et al) to “buy” a car for their inventory. The interest rates are usually like 6%-7%-ish. When they sell a car, if the lender is Ford Credit, there is bookkeeping and the dealer has paid off its debt. If the lender is another bank, that institution sends the dealer the money, and Ford Credit gets paid.
I thought Ford was actually raising floor plan rates eff. Nov 1 for parts of its business, but that was put in place long before the very recent market woes (maybe Q2?). I’m not sure if this is temporary or when the rates go up 100 points, it will only be 100 points after the 50 point reduction – so 50 points up?
“Dealers don’t buy the cars from corporate and then sell them.”
Technically the dealers do own the car, they just have a secured loan out. Dealers borrow this money from their bank or from the finance arm of the auto company, much like a retail buyer who borrows money to buy a car.
Hopefully for Ford’s sake, this works better than Mitsubishi’s disasterous problems with low-rent finance deals (for low-rent sheeple).
You know, the customer base that GM has been “servicing” (for lack of a better word) and which they now cannot wrangle into 6 year loans with upside down trades.
I don’t know what GMACs previous standards were like, but Ford Motor Credit seems to be fairly smart in how it lends money.
A lot of Ford/Lincoln/Mercury customers are return buyers, and if their previous Ford loans were paid on time, they are almost always bought again, regardless of any other current credit issues. On the same level, someone who defaulted with Ford Credit in the past has a very difficult time getting another loan, even if their overall beacon score is high.
We have also been seeing Ford Credit asking for more stipulations lately (i.e. proof of residency, proof of income, etc) which is fair, as those customers who can come up with it are getting bought, but those deadbeats who were trying to pull one over and who would have skipped on the loans are getting rejected.
Ford isn’t moving to a ‘finance anyone with a pulse’ system, they are simply doing what they have always done to earn customers and money, and doing a little bit more due diligence.