Capital One to Exit Auto Dealer Services Business This Year

Capital One has announced that it will terminate its auto dealer services business, including floorplan lending, later this year. Floorplan lenders extend a line of credit or short-term loans to dealers to buy inventory. The loan is collateralized by the purchased vehicle (and, in some cases, other physical assets like the building or property). It is repaid when the inventory is sold. According to a Capital One spokesperson, floorplan lending was “not core to the long-term priorities of our commercial bank” and only represented around 1% of its commercial business. It was also stated there will be “no impact on the Capital One Auto Finance business.” Despite this decision, Stephens Inc. Managing Director Daniel Imbro believes a broader exodus of floorplan lenders is unlikely, stating that he “does not think it presents a risk at least to my covered company universe as far as the franchise dealers because I don’t think they see lenders pulling back.” Nevertheless, dealers will likely be monitoring the floorplanning market closely as rising interest rates continue to impact vehicle sales and floorplan costs.