Fifth Third, Capital One exit floorplan lending in commercial realignment

Ally’s floorplan outstandings grew to $13B in Q4

Fifth Third and Capital One are exiting floorplan lending as banks continue to reassess business lines in the face of rising interest rates and diminished inventory.  

Capital One and Fifth Third’s exits from floorplan lending are likely internal decisions based on prioritizing how funds are used rather than an indication of an industrywide pullback in commercial floorplan lending, Erin Kerrigan, founder and managing director of Kerrigan Advisors, told Auto Finance News.  

“The banking crisis that’s been brewing in the U.S. is causing disruption in deposits, and these banks are having to assess where their funds are being invested and lent,” she said.  

Citizen’s Bank, for example, has for the past year pulled back on consumer auto loans to prioritize product lines with higher returns.  

Fifth Third notified clients in March that the bank would be pulling out of floorplan lending, a bank spokesperson told AFN.  

“As an organization, we continually review our ability to deliver best-in-class solutions to our clients. Due to changes in the industry, Fifth Third has decided to no longer support the dealer floorplan product,” Craig Harter, head of indirect lending and senior vice president, told AFN.  

“This decision does not impact the way the bank operates its indirect auto consumer lending business. The bank will continue to support dealers — at the local level — in all other facets of a commercial relationship including treasury management, commercial real estate, employee benefits, merchant processing, private banking, wealth management and more.”

Capital One decided to exit floorplan lending on March 29 and will be “winding down that work this year,” a Capital One spokesperson told AFN in a statement.

Capital One ended floorplan finance services after the bank evaluated its commercial business priorities “in light of the needs and opportunities that we see ahead in a more challenging economic environment,” the spokesperson said. “This was a non-material component of our commercial banking business and is not core to the long-term priorities of our commercial bank.”

In fact, floorplan utilization rates have trended lower in the past few years as inventory remains below pre-pandemic levels despite inching back up. TD Auto’s dealer partners, for one, are using an average of 40% of the capacity on their floorplan lines of credit with the Toronto-based lender. This is down compared with historical utilization rates of 65% to 70% but up from a pandemic-driven low of 25%.

The floorplan exit does not impact Capital One Auto Finance’s consumer lending business, the spokesperson said.  

Floorplan growth

Several banks are growing their floorplan businesses. Ally Financial’s floorplan outstandings totaled $13 billion at the end of 2022, up compared with $10.8 billion in the third quarter of 2022 and $1.9 billion during the same period a year prior, according to the lender’s earnings supplement.

Huntington Bank has not changed its floorplan strategy and “continues to be focused on growing commercial dealer relationships,” Rich Porrello, president of auto Finance and dealer services, told AFN. Bank of America’s floorplan strategy also remains the same, people familiar with the matter said.

Chase Auto continues to provide floorplan services for new and existing clients nationwide and “sees a steady pipeline of new client opportunities, including rooftop growth with our private label businesses as well as support for larger dealer group acquisitions in the syndicated loan space,” Charles Arnold, national sales executive for commercial dealer services, told AFN in a statement.