In an outgrowth of its aggressive Internet strategy, Bank One Corp. has become the main provider of automobile loan and lease financing for customers of CarsDirect.com.
The automobile retailer lets consumers nationwide configure, finance, buy, and arrange delivery of their cars via the Internet. The service was officially started last week after a test lasting about five months during which 600 cars, valued at $20 million, were sold.
Bank One aims to solidify the relationships it has with a vast network of dealers by making them suppliers for CarsDirect.com, a venture backed by funding from Goldman Sachs, MCD Partners, Foundation Capital, and Idealab.
The arrangement gives CarsDirect "a dealer network and a lending network, while Bank One is getting an increased Web presence," said Greg Brogger, chief operating officer at CarsDirect. He would not disclose any financial arrangement between the two.
Keith S. Kendrick, president of Bank One's e-commerce business, said Bank One and its dealers alike "have to be proactive rather than wishing the (Internet) channel wasn't there. We must understand the space and find a way to participate and compete in it together."
Winners in the Internet economy will be the ones that "get there first" and establish their brands, said Kenneth B. Clemmer, an analyst at Forrester Research in Cambridge, Mass. Bank One is seizing an opportunity to become the Amazon.com of the automotive lending industry, he said.
Through CarsDirect.com, prospective buyers may select an automobile from more than 2,500 makes and models, click through the financing package offered by Bank One, and have the presold deal re-routed to a participating local dealer that prepares the vehicle for delivery or pickup.
If Bank One rejects the loan, the prospect would be referred to a network of other lenders that the bank and CarsDirect are assembling.
Bank One, through its Finance One consumer loan subsidiary, is also working with CarsDirect to assemble a preferred dealer network, said Don Winkler, chairman and chief executive officer of Finance One. These dealers would supply the new vehicles, perform predelivery services, acquire trade- ins, and do warranty repairs and servicing.
Mr. Kendrick said 1,500 dealers contacted by Bank One have responded favorably to the CarsDirect.com site. An attraction for dealers is the opportunity to sell more cars without incurring additional sales or marketing costs.
Bank One plans to start an auto lending Web site of its own in the next couple of months, Mr. Kendrick said. It would include functions to automatically select various loan and lease pricing packages for autos provided through a number of Internet car-selling sites.
The CarsDirect.com deal is the first in which Bank One is bringing its auto lending into line with its corporate Internet strategy, Mr. Kendrick said.
The banking company has alliances with Internet portals, including America Online and Excite.
Last week it opened a revamped Web site that offers on-line investing, insurance purchasing, bill payments, home equity financing, access to Dow Jones News Service, and Net search capabilities.
