Capital One CEO Signals Slight Pullback in Auto Loans As Competitors Work to Maintain Low Interest Rates

By: Ken Chase.

Estimated reading time: 2 minutes

While most major banks across the United States have raised their loan rates to adjust for recent Federal Reserve interest rate increases, credit unions and some large lenders have worked to maintain their lower rates for auto loans. That aggressive stance moved Capital One CEO Richard Fairbank to suggest that his company will be pulling back slightly on its auto loan efforts until the pricing situation is more attractive.

According to Fairbank, some lenders have resisted any reasonable increase in their auto loan rates, and instead maintained rates much lower than the recent rate hikes would ordinarily dictate. Meanwhile, credit unions have left their prior rates almost unchanged. Those flatter prices have helped to provide those lenders with a significant increase in auto loan market share.

Fairbank acknowledged the issue during the company’s most recent quarterly earnings call last week, telling analysts that profit margins have tightened for the firm’s auto loans. He also asserted that Capital One’s pullback would only be temporary, and not a major retreat from the auto lending business. Instead, the pullback is simply a recognition that the current pricing structure is less than ideal for the company’s auto loan goals.

The slight pullback was already in evidence during the company’s second quarter of operations. Capital One reported earnings of $10.3 billion from auto loans during that quarter – a decline of 12 percent from the nearly $12 billion it reported in the first quarter of the year. Those second quarter results represent a roughly 20 percent drop from the same period in 2021.

Fairbank did not name the companies that have been working to maintain lower loan rates, but did emphasize that Capital One’s auto lending continues to be an important part of its business and plans for future growth.

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