Senate approves tax break for auto loan interest

Harry Stoffer
 

WASHINGTON -- The U.S. Senate voted today to make loan interest and sales taxes on vehicle purchases deductible from federal income taxes.
The proposal, championed by the National Automobile Dealers Association, was added to an economic stimulus bill under debate in the Senate. The vote was 71-26.
The provision was not in a House-passed version of the more than $800 billion package of spending increases and tax cuts.
A conference committee will decide whether the provision stays in. The bill is a top priority of President Barack Obama.
If the measure passes, taxes on auto loans will be deductible for the first time since 1986.

Incentives to Dealers

GM rose 18 cents, or 2.9 percent, to $6.40 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have tumbled 74 percent this year, the most among the 30 companies in the Dow Jones Industrial Average.

GM also is expanding its incentives to dealers by offering cash bonuses for sales financed by lenders other than GMAC, now 51 percent owned by Cerberus Capital Management LP.

The program began last week and includes most 2008 and 2009 models, said Richard Joseph, director of Cincinnati-based Joseph Auto Group, whose dealerships include Chevrolet and Cadillac outlets. McDonald declined to comment.

Oct. 16 (Bloomberg) -- General Motors Corp., facing a drop- off in loans from former lending unit GMAC LLC, will begin advertising tomorrow to reassure buyers they can still borrow from hundreds of banks.

The push by the largest U.S. automaker comes four days after GMAC said it would lend only to buyers with top credit scores. The ``Financing that Fits'' campaign also will emphasize existing rebates of as much as $6,000 on some 2008 models, GM spokesman John McDonald said.

Using advertising money to highlight access to loans underscores automakers' challenge in these ``incredibly unusual times,'' as Chief Executive Officer Rick Wagoner put it this week. Deutsche Bank AG analyst Rod Lache said Oct. 14 that the industry sales rate in October may be the worst since 1983.

``It speaks to the difficulty GM is having,'' Marshall Nickles, a professor of economics at Pepperdine University in Los Angeles, said in an interview. ``Given the public impression that loans might not be available, they need to send this message.''

GM, based in Detroit, will run the ad campaign until Nov. 3 on television, radio and the Internet, McDonald said. Customers will apply for loans using a Web-based system and be able to choose from many participating lenders, he said.

North American sales and marketing chief Mark LaNeve recorded radio commercials for the campaign. ``I know that some of you may be worried about getting financed,'' he says in the ads. ``The truth is, a market like this creates some great opportunities,'' such as low down-payments.