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Capital One Puts Dealers in the Driver’s Seat

July 2007, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Q: Capital One has definitely been on the move since entering the subprime automotive finance market in 1998. With all the mergers and acquisitions that occurred in the last couple of years, I was wondering if you could recap for our readers what Capital One has been up to?

A: As you said, our purchase of Summit in ’98 was our first entry into the business, but we’ve grown substantially since then. I think we’ve made some great organic growth, but we also brought PeopleFirst.com into the family in 2001. In the last few years, we added Onyx Acceptance Corp, Key Bank, part of their portfolio, as well as Hibernia National Bank and North Fork Bank in 2006.

Q: You’ve certainly been busy. Do you expect more merger-and-acquisition activity this year?

A: Our real focus this year is making our new program, which we’re rolling out nationally this month, successful. Basically, we’ll be providing our 18,000 franchise and independent dealers with a true full-credit spectrum financing program, one that will address 500 FICO scores and up. So that’s what’s got 100 percent of my attention these days.

Q: You definitely seem to be one of the frontrunners in this full-spectrum trend. In fact, in a March market report, Standard & Poor’s listed Capital One as being at the center of this trend. For our readers, with everyone touting full spectrum, what will be the differentiator?

A: I think the differentiator, and what I think dealers will find if they give us a try on a full spectrum basis, is that they will see that we are buying across the credit spectrum. We will buy the 500 paper. We’ll buy paper up at the top of the FICO range, too. And we’ll do it with competitive offers. And I think that’s the real test of whether someone has gone full spectrum — what kind of offers they can make to dealers across the full credit spectrum to help them meet their needs.

Q: Going back to your new program, One Program, can you tell our readers a little more about your plans?

A: With the acquisitions we’ve made in the last couple of years, this new venture is aimed at integrating the best of each company. That’s going to mean buying full-credit spectrum in a serious way. It’s going to mean moving to dedicated dealer relationships, where both field and internal resources will be focused on individual dealers so they have a specific person to work with across the whole credit spectrum.

The main thrust is getting the fastest turnaround possible on approvals, funding and all the other things that dealers really care about. The program was available for a large section of the country until June 18, which is when we rolled it out nationally. By the time dealers read this interview, they should have been hearing from our field reps as to what’s changed.

Q: Does this rollout include the opening of new offices in new regions for Capital One?

A: We are doing that, but we’re really doing two things here. First, we are leveraging the acquisitions we’ve made, as well as expanding into new regions across the country. We’re doing that through buying centers, which is where we’ll have dedicated staff to address dealer needs. For example, we’re going to have a buying center in Foothill Ranch, Calif., where Onyx was. We’ll have a satellite office in Baton Rouge, La., where Hibernia was. We’ll be using North Fork’s location in the New York state as our Northeast buying center. We’re going to have 10 different places across the company basically staffed up to support dealers directly.

Q: So this is the final step to being full spectrum?

A: Yeah, this is the first time we’re bringing it all together, and moving to a full-spectrum financing approach. And we think we have what it takes to back it up. And that doesn’t mean we’re not going keep getting better. What we’re doing is kind of a nice way for us to bring everything together from the acquisitions that we’ve made and from the initiatives we wanted to bring into the market.

Q: Looking at your most recent quarterly report, going full spectrum has definitely paid off. Your auto finance business continues to deliver profits and grow originations due to your full spectrum strategy.

A: Overall, we’ve been really happy with the growth we’ve seen across the spectrum. And, as you pointed out, our results at the end of March had our portfolio up to about $24 billion. And that’s based off of the $10 billion we reported in 2004. So we’ve experienced some nice growth, and we’re feeling pretty good about how each of our segments is doing. What’s really attractive to me is that we’ve achieved this growth without having an integrated program like the one we’re pushing forward now. So, if we’ve been able to achieve what we’ve done with all these pieces of the puzzle, I’m really excited to see what happens now that all the pieces have come together. We’ve been trialing this program for about seven or eight months here in Texas and Oklahoma, and we’re quite pleased with the results. We think we’re going to have a good program here nationally.

Q: I’ve heard from other industry insiders that the true test of going full spectrum will be the mid-prime, or nonprime segment. What’s your take?

A: The way to really test someone’s full spectrum ability is to see where they really buy. One of the things I’m really excited about with our full spectrum program, and our history as a player in that part in the market, is that dealers will find that we will continue to be a strong player in the nonprime area, just as we continue to be very competitive in prime. And, with our history in the nonprime area, we’re very well set up to succeed there. And the things we’re doing to expand into prime can only help us move forward.

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