Capital One 2002 Annual Report Download - page 9

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Our to auto lending
is … well … turning a lot of keys.
Capital One
®
is successfully putting its credit card expertise to work in the broader consumer
lending market, where we see big opportunities for profitable long-term growth.
Auto finance, with more than $1 trillion in loans outstanding, is nearly twice the size of the credit card
market. After two acquisitions and four years of making auto loans, Capital One has a $7 billion portfolio
with steadily improving profitability. Our skill in analyzing credit risk and pricing each loan accordingly creates a
win-win situation for us and our customers: we minimize lending risk, they get the best deal. As we’ve built scale,
we’ve dramatically cut operating costs, from nearly 10% of loans outstanding in 1999 to 3.57% in 2002.
Our superprime auto finance business continues to grow rapidly despite the auto industry’s offers of low- or
no-interest financing. Many consumers who do the math realize that they’ll come out ahead by combining
a car manufacturer’s offer of a cash rebate with financing from Capital One Auto Finance. The largest Internet
originator of auto loans, Capital One Auto Finance gives superprime borrowers no-hassle service and convenient
access to financing, features that are generating exceptionally high levels of customer satisfaction.
In the $175 billion installment lending business, we market personal loans to superprime borrowers,
high-income people with long and stellar credit histories. The low risk allows us to offer the loans at an
exceptionally low fixed rate—7.9% in many cases, which is five percentage points below the industry average.
Installment lending has added $4 billion in blue-chip assets to Capital One’s managed loans.
In 2002, we entered the small-business lending sector. With a Capital One business credit card, a small
entrepreneur has hassle-free access to loans for operating capital—a big help in smoothing out cash flow and
meeting extraordinary expenses. Our small-business lending is growing rapidly and yielding above-average returns.
The auto finance, installment and small-business lending markets are highly fragmented, presenting opportunitie
s
for significant gains in market share. We believe our information-based strategy will allow us to transform these
businesses through direct marketing, innovative products and customization. The payoffs: better deals and less
hassle for borrowers and new sources of profitable growth for Capital One.
turnkey approach
7