AFC HoldCo LLC, an independent auto finance company that provided auto loans through more than 4,000 dealerships in 40 states, is shutting down, reported Automotive News.

AFC’s parent company, Mitsui & Co. of Japan, said today it will liquidate the company because of the downturn in auto sales.

The Japanese trading house acquired 87.5 percent of the Wilmington, Del., company for $63 million in 2007 expecting the auto finance business to expand. But it shrank in the wake of the financial crisis.

“We cannot foresee a recovery in auto finance business,” Mitsui said in a statement.

It said the liquidation will have little impact on its financial statements for the fiscal year ending in March.

AFC HoldCo was created in 2007 through a merger of two companies — Affiliated Financial Corp. and BayQuest Capital Corp. The owners of those firms held a 12.5 percent stake in the new company.

The company is unrelated to Automotive Finance Corp., an independent finance company in Carmel, Ind., that is affiliated with the auto auction chain ADESA Inc.

The expectations highlighted in Kelley Blue Book’s latest Market Intelligence survey also point to a challenging time for F&I departments, with more than one-third of respondents indicating that they plan to pay the entire cost of their next vehicle purchase in cash. Incentives, according to the survey, aren’t having much influence, either.

The study, which surveyed 338 in-market car shoppers on kbb.com from June 18-21, also showed that nearly three-quarter of those surveyed plan on purchasing within the next six months, with a majority of consumers (67 percent) saying they are more interested in a used vehicle than a new one (33 percent). In addition, 42 percent of used-car shoppers and 20 percent of new-car shoppers said they plan to pay the entire cost of their next vehicle in cash.

“In-market car shoppers are taking a decidedly conservative approach to car buying right now, which we think can be directly attributed to low consumer confidence in the current economy,” said James Bell, executive market analyst for Kelley Blue Book’s kbb.com. “It seems people are re-assessing their financial situations and deciding to spend less, buy used and pay more often with cash.”

Most used-car shoppers (62 percent), according to the study, said they plan to spend less than $15,000 on their next vehicle purchase, while half of new-car shoppers (50 percent) said they plan to spend $25,000 or less on their next vehicle purchase.

Additionally, a majority (82 percent) of used-car shoppers and more than half (51 percent) of new-car shoppers said that incentive offers have no effect on the timing of their next vehicle purchase. In addition, 81 percent of used-car shoppers and 48 percent of new-car shoppers said that the availability of incentives have no effect on their specific vehicle choice (make/model).

And of those who intend to finance their next vehicle purchase, zero-percent financing was listed as the most appealing incentive offer at 30 percent, followed by low monthly payments at 21 percent. In addition, women were twice as likely to find low monthly payments the most appealing incentive offer when compared to men (32 percent of women vs. 16 percent of men).

“Incentives have loosened their tight grip on the American consumer, with more people deciding to purchase what they can truly afford versus what they can get with over-extended credit lines and incentive offers on the hood from manufacturers,” added Bell.

By far, the most popular loan term was 60 months, with 42 percent of respondents indicating they prefer to finance over five years. The second most popular term was 36 months at 21 percent, followed by 48 months at 20 percent. Only 11 percent preferred 72 months, and just five percent cited 24 months.

Researching before buying is also expected to pick up, with 57 percent of respondents indicating that they intend to research vehicle financing options online. Fifty percent of respondents said they plan to obtain pre-approval through a bank or credit union, while only 34 percent indicating that they plan to obtain financing at the dealership at the time of purchase.

Shoppers also cited control in negotiations as the top motivator (44 percent) behind financing through a bank or credit union, followed by low interest rate (34 percent). Shoppers, however, did acknowledge the convenience of in-dealership financing, with 54 percent of those surveyed saying it is the primary motivator behind financing at the dealership, followed by low interest rate (32 percent).

According to the survey, the average shopper has three vehicles in his or her consideration set and 83 percent of all survey respondents said they are still undecided on the make and model of their next vehicle. Younger car shoppers (age 34 and under) are more open to buying either a domestic or import brand (45 percent), compared with shoppers age 55-plus who are more likely to have decided upon either a domestic brand (39 percent) or an import brand (32 percent).

Among both new- and used-car shoppers, price and durability, reliability and quality tied at 33 percent as the top two deciding factors when considering a vehicle to purchase. The next-highest deciding factor was past experience with the brand, rated at 12 percent.

Shoppers also indicated that negotiating remains a crucial part of the car-buying process, with 62 percent indicating that they prefer negotiating to having a single set price. That number increases more among younger car buyers when examining the data demographically, as 73 percent of respondents age 34 and under feel that negotiating is a crucial part of the process, compared with 59 percent of respondents in the 35 to 54 and 55-plus age categories.

Additionally, 40 percent of respondents use the average transaction price as the starting point for vehicle negotiations, while 32 percent begin negotiating with the dealer invoice price. Only 9 percent of shoppers indicated they began negotiations with the manufacturer’s suggested retail price (MSRP). In addition, most consumers (38 percent) said that if they pay the average transaction price, they feel they have gotten a good deal.

Credit is slightly looser than it was last year but not exactly flowing. Car dealers and others will tell you that many consumers will find getting a loan to be tricky. But the securities market for bonds backed by auto loans and leases has been gaining steam — which means more money becoming available — despite concerns in recent weeks about global economic growth.

Jeff Schuster, executive director of global automotive forecasting at J.D. Power and Associates in Troy, said car and truck sales for 2010 will be greatly influenced by how much credit loosens up. He said the situation is improving but has a ways to go.

“It may be easier to get a loan maybe later in the year than it is now,” Schuster said.

Consumers who plan to try to borrow in the near future need to make sure they are paying their bills on time and should aim now to pay off credit cards, especially if they’re carrying a large amount of debt in relation to their line of credit, said Maxine Sweet, vice president of public education for Experian.

Experian data show the average credit score in metro Detroit this year is 745, down from 755 in 2007 and slightly lower than the U.S. average of 749 on Experian’s VantageScore range of 501-990.

That means a score in the 700 range is like a C grade. If your score is above 900, your credit history is an A — and you can pretty much write your own ticket for easier credit and lower-priced loans.

In general, if you have $10,000 in available credit card lines, it is better for your credit score if you owe $3,000 rather than $4,000 or more.

On the plus side: Consumer loan delinquencies did fall in eight of 11 loan categories in the fourth quarter of 2009, marking the second quarter in a row of broad-based improvement, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.

But on the downside: Home equity loan delinquencies hit another record.

And if you think the housing crisis didn’t hurt car sales, think again.

“Without housing equity to tap, and foreclosures leaving consumers even less creditworthy, it makes selling cars more difficult,” Swonk said.

J.D. Power is forecasting sales of 11.8 million cars and light trucks in 2010 vs. 10.4 million cars and light trucks sold in 2009.

Consumers should be able to buy cars, Schuster said, because leasing is more available than it was a year ago, the economy has gradually improved and drivers may see better trade-in numbers now.

After holding onto their cars longer, Schuster noted that many consumers may not owe as much on their cars as they did a year ago. And consumers may not be as upside-down on car loans — meaning they won’t owe far more than the old car is worth.

Lately, the average trade-in car or truck is 6 years old, according to J.D. Power, compared with 5.4 years in the spring of 2007. Last August — during cash-for-clunkers — the average trade-in vehicle was 10 years old.

But then there’s that credit issue.

“The primary hurdle is credit,” Swonk said.

Even now, Swonk said, “auto buying is heavily concentrated in the highest-income households, buying more loaded vehicles, as they are the only ones who can qualify for current lease and credit deals, or can pay cash.”

Right now, GMAC Financial Services is offering zero percent interest loans and discounted leases to help GM and Chrysler boost sluggish sales. GMAC is offering a $499 a month, 39-month lease on the Cadillac CTS with $1,000 down—or nothing down for customers already driving vehicles leased from GM. (Beware: The penalty for driving more than 39,000 miles is $0.20 a mile.)

Honda Motor Co. is offering aggressive lease deals—pushing leasing to more than half of current deals. Among the Honda offers is a $0 down, 36-month lease on a 2010 Honda Civic LX with payments of $159 a month. Luxury car makers are pushing to accelerate the rebound in demand. BMW dealers are promoting $2,500 discounts on certain models as part of a “spring drive” event. Lexus dealers are promoting a $359 a month, 36-month lease deal for the Lexus IS, with the first month’s payment waived. (Fine print on one dealer’s website cautions the deal is for people with “top tier” credit.)

Data compiled by Informa Research Services Inc. and J.D. Power and Associates suggest the thaw is real and widespread. For example, Informa’s analysis of the rates lenders are offering to consumers in different credit tiers shows that between January 2009 and March 2010, the average rate offered to consumers with top-drawer credit—FICO scores in the range of 720 to 850—dropped to about 5.8 percent from 7.1 percent.

The rates for customers with middle-tier FICO scores in a range of 660-689 were being offered loans at an average rate of about 9.4% in early March, down from an average of 10.2 percent in January 2009.

But people whose credit scores fell below the 660 level were offered loans earlier in March at average interest rates of about 13.2 percent—up from about 12.9 percent in January 2009.

After the late-2008 financial-market meltdown, getting customers with credit issues into a new car loan was hard work. Customers needed to put down a third of the car’s price or get co-signers if their credit scores weren’t top notch, Mr. Gorham says. Now, even the consumer with a weaker credit score might get the loan, as opposed to being denied, dealers say.

The recovery in the auto credit market is the result of various factors, analysts say. A program launched by the Federal Reserve to jump start demand for securities backed by car loans worked, and slowly allowed auto makers’ finance companies to once again raise capital for new loans by selling off their old ones. That program recently expired, amid a consensus that it was no longer needed. It helped that even in hard times, consumers tend to pay their car loans.

J.D. Power and Associates analyzed its credit data, along with data from TransUnion LLC and Fair Isaac Corp., and found that the share of subprime auto loans financed by auto finance companies has expanded to 51 percent in early March from 40 percent in January 2009.

Informa puts the difference between the average loan rate offered to someone with a FICO score in the 620-659 band and someone in the 660-689 band at nearly 4 percentage points. That’s about $2,300 over the life of a four-year, $25,000 car loan.

What this means is that now more than ever, consumers shopping for auto leases and loans need to know what their credit scores are—and if they can, take steps to repair or bolster their credit if the numbers are low. Consumers also have more options when shopping for the best rates from credit unions or banks, as well as the dealer finance departments and the auto makers’ lenders.

Franklin W. Hobbs, GMAC chairman, said, “Mike Carpenter is a world-class CEO, and the board has great confidence that he is the right leader for GMAC at this pivotal moment. GMAC will benefit from Mike’s broad and deep experience in banking, capital markets, turnarounds and corporate strategy. In addition, as a GMAC board member, he has first-hand knowledge of GMAC and the challenges and opportunities the company faces in its drive to return to sustained profitability and to repay taxpayers.”

Carpenter succeeds Alvaro de Molina, who has resigned as CEO and a director. Carpenter, 62, has served on the GMAC board since May 2009. His previous experience includes CEO positions at Citigroup’s Global Corporate & Investment Bank, Salomon Smith Barney, Travelers Life & Annuity and Kidder Peabody. During his 35-year career, Carpenter has also held senior positions at GE Capital, General Electric and Boston Consulting Group.

“I am honored by the opportunity to lead GMAC at this critical juncture,” Carpenter said, pledging to work with a sense of urgency to make GMAC the premier provider of auto finance and related services for both dealers and consumers across the country.

Carpenter noted that the challenges facing GMAC are substantial, but he expressed confidence that the company and its leadership have the resolve, talent and vision to restore its fiscal health and build on its unique franchise.

“A renewed GMAC is crucial to business and public sector efforts to bolster the U.S. auto industry, and we have a special obligation to the public to do everything we can to ensure GMAC succeeds,” Carpenter said. His mission, he noted, includes operating GMAC “at the rigorous standards required of a bank holding company, resolving the difficult issues we face with the mortgage business, and repaying in full the funds the U.S. government has invested in GMAC.”

The board of GMAC has requested that the U.S. Department of the Treasury postpone its decision on the planned follow-on investment of Troubled Asset Relief Program funds in GMAC until Carpenter and the management of GMAC have assessed the current situation and can advise the board and Treasury regarding the appropriate amount and form of such funding.

Carpenter has resigned from the board of CIT Group in order to devote his full attention to his new role at GMAC.