Capital One Gives Banks an Alternate Route to Consumer-Direct Auto Finance

By Lawson, David R. | ABA Banking Journal, September 2005 | Go to article overview

Capital One Gives Banks an Alternate Route to Consumer-Direct Auto Finance


Lawson, David R., ABA Banking Journal


When it comes to direct-to-consumer auto loans today, banks are often stuck in neutral--or reverse.

Many banks have essentially surrendered the auto lending market--mostly to credit unions and captive finance companies--by failing to offer their customers competitive rates, products and services.

But a new national program is giving banks a different way to gain a competitive advantage in direct auto lending, which can bolster their customer acquisition and retention efforts.

Capital One Auto Finance, the nation's third-largest independent auto lender, recently became the country's first large-scale lender to offer its scale and expertise to banks through its Agent Banking Auto Finance program.

"Most banks don't have the national scale that's needed to be competitive in direct-to-consumer auto lending, so this program makes a lot of sense," said David R. Lawson, president and CEO of Capital One Auto Finance.

Banks across the country are starting to realize the program's benefits. One bank with nearly $20 billion in assets reports that since partnering with Capital One earlier this year, it has more than tripled the number of auto loan applications it approves.

Why Should Banks Offer Auto Loans Direct to Customers?

* Good Fit with Customer Preferences: A recent survey shows that nearly 66 percent of Americans prefer to have all of their financial needs met by one institution (source: InsightExpress). Another recent study reveals well over half of in-market car shoppers will comparison shop for car loans through multiple sources--including banks--before purchasing (source: Capital One).

* Retaining Customers Increases Profits: Increasing customer retention by 5 percent can increase the lifetime value of the customer by as much as 80 percent (source: Fredrick Reichheld, The Loyalty Effect). …

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Capital One Gives Banks an Alternate Route to Consumer-Direct Auto Finance
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