Chrysler Financial Turns Off Tap

DETROIT — Chrysler Financial is no longer offering auto loans for car buyers beginning Friday, according to dealers who were briefed by the company.

The move is likely to make it more difficult for many Chrysler dealers to sell vehicles for at least the next several days until they can move to a new lender, the dealers said.

Chrysler Financial said Thursday it will effectively shut down its operations and its lending activities will picked up by GMAC LLC, the giant finance arm affiliated with General MotorsCorp. The move was triggered by the bankruptcy filing by auto maker Chrysler LLC Thursday, and Chrysler Financial’s own financial troubles. Chrysler and Chrysler Financial are separate companies.

Dealers who were briefed by Chrysler Financial said the lender has halted consumer loans operations. Chrysler Financial is emailing dealers applications to start getting consumer loans through GMAC, the dealers said.

“We began receiving our paperwork from GMAC today through email,” said one dealer who was filling out the information. He asked not to be identified because the change wasn’t public yet. “As soon as we turn it back in and they clear it, we are covered by GMAC.”

The dealer said all Chrysler dealer should be covered by GMAC by no later than Monday. GMAC will also immediately cover all Chrysler Financial loans made to dealers to put inventory in their showrooms. GMAC will conduct a review of those “floor plans” over 60 to 90 days before deciding which dealerships they will continue funding. Some Chrysler dealers could find their financing completely cut off.

In a statement, Chrysler Financial said it will monitor “the effect of this decision on its lenders, investors, dealers and employees. While the planning has gone on for several months, the ultimate impact on our constituents will be assessed over the next few days.”

Consumer loans for new and used vehicles, whether produced by Chrysler or other auto makers, “is being suspended except for applications submitted prior to May 1, 2009,” the document says.

The company on Thursday said it was no longer extending loans to dealers that are used to buy inventories of new cars because of Chrysler’s bankruptcy filing.

Chrysler and other auto makers will be reporting their U.S. sales for April in the course of the day. The U.S. auto market is in a deep slump, and of note will be any additional impact on sales for Chrysler as the prospect of a bankruptcy filing loomed last month.

By Alex P. Kellogg | Copyright © 2009 The Wall Street Journal. All Rights Reserved