Aussies mulls debt guarantee for car dealers

Australian car dealers threatened by the withdrawal of two of the industry's largest financiers could be underwritten by a A$2-billion (NZ$2.38-billion) federal government-sponsored debt guarantee.

Australian Prime Minister Kevin Rudd and Treasurer Wayne Swan have been presented with rescue options to entice banks and other credit providers to create a special pool to fund financing for showroom stock.

It comes as many car dealers face closure due to difficulty obtaining credit as a result of the global financial crisis.

Future Fund chairman David Murray has produced a plan which is understood to include options on how a government guarantee could be provided to woo lenders into the car financing business, The Australian reports.

Mr Murray has been acting as a special envoy liaising with the banks and the regulators during the credit crisis.

Under the plan, credit providers would provide funds to the special car financing pool that would then be made available to automotive financiers.

This would help to fill the A$2-billion shortfall caused by the announced withdrawal of industry lenders GMAC and GE Money from financing cars stocked in dealers' showrooms.

The government guarantee for car industry financing would come for a fee, estimated to be between A$10 and A$40 per car, paid by dealers and ultimately car buyers.