DETROIT -- General Motors Acceptance Corp. said it will be a challenge to offer competitive auto loan rates because of GM’s lower credit rating, reported The Detroit News. However, the finance unit still expects to exceed 2005 profit targets and boost its dividend to the parent company.

The assessment, from GMAC Chairman Eric Feldstein, came one day after GMAC announced a five-year deal to sell $55 billion in auto loans to Bank of America Corp.

In 2004, GMAC earned a record $2.9 billion and has posted 10 consecutive years of earnings growth.

GMAC’s borrowing costs have increased because two credit rating agencies have downgraded its debt rating. The cuts have reduced GMAC’s access to funding sources with favorable borrowing rates, according to The Detroit News.

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