Car dealers seek finance lifeline

The Australian government is looking into the merit of a temporary lending pool to provide credit to car finance companies, and in turn to car dealers, The Australian and The Financial Review reported.

The withdrawal of GE Money and GMAC from providing floor plan finance to car dealers means that 40 per cent of dealers may have to drastically reduce stock or close.

Other financiers will pick up the most credit-worthy dealers but, given the industry lobbying, it appears many may hit the wall.

The Australian reported the car industry put the plan to the Government in recent days, and the government asked Future Fund chair (and former Commonwealth Bank chief executive) David Murray to look into the proposal.

The newspaper reported that the prime minister, Kevin Rudd, raised the car finance issue at a meeting with the chief executives of the big four banks and also Murray last Thursday.

The form of the proposal reported by The Australian involves lending to captive finance companies such as Ford Credit and Toyota Finance.