In separate letters sent to its investors and dealer clients on Wednesday, Car Capital said it is still in business, but it paused auto finance originations due to “difficult capital market conditions.”

As a result, Car Capital also said it “executed a material reduction” in its workforce, particularly the employees who helped to build its portfolio that often catered to subprime and deep subprime consumers.

Speaking of that portfolio, Car Capital transferred servicing of those outstanding contracts to Westlake Financial in a move that happened last Friday.

“As you are likely aware, Car Capital has pulled back on origination volume over the past few weeks,” the company said in the letter to dealers. “In large part, this pullback was caused by a combination of the tremendous volume growth we have experienced and difficult capital markets conditions that have constrained the capital we have available to support you and your customers. We are fortunate to have a deep base of committed investors who are continuing to support us, and we are working actively with those stakeholders to provide us additional growth capital so we can continue to support you.”

Car Capital also elaborated about transferring its our consumer servicing function to Westlake Financial.

“We believe this is an important step in maximizing the value of our (and your) existing portfolio and all future originations,” Car Capital said. “Westlake is a top-notch consumer loan servicer, and we expect great performance from them. The transfer of servicing will not impact our contractual relationship with you or your interest in your portfolio. All communications with the consumer customers will be handled by Westlake going forward, and all of those customers should have already received various communications from Westlake advising them of the transfer and the associated changes.

“Importantly, transferring consumer servicing to Westlake enables us to focus our capital and energy on one thing — providing you and your customers with attractive financing alternatives that are great for you and them. That is why we started our business in the first place, and we are excited to refine our focus and concentrate our energy,” Car Capital went on to say

In that letter to dealers, Car Capital said it expects to relaunch its financing platform “in the very early part of Q1 2023,” telling dealers, “we will be communicating with you regularly prior to the relaunch to let you know our plans and how they will benefit you.”

Getting back on track early in the new year also was mentioned in Car Capital’s letter to investors, who watched the company begin its operations in the spring of last year. Then in January, Car Capital landed a $150 million three-year secured credit facility and a $6.125 million equity investment from funds managed by affiliates of Fortress Investment Group.

“We have significant support from our lenders and existing major equity investors. These investors have already provided valuable flexibility around credit facility compliance and two tranches of bridge financing to ensure we can continue to operate and develop our plan to retool and relaunch,” Car Capital said in Wednesday’s letter.

Late on Wednesday afternoon, Cherokee Media Group connected with Car Capital CIO John Chipps, who did not give a specific number about the number of employees impacted. But Chipps did share this perspective.

“Yes, the reduction in workforce was extremely difficult. We had a very large staff in tech sales and on the originations, collections and funding side. Those areas were hit extremely hard,” Chipps said. “As we know what’s going on with the economy, it’s a tough time for families. It was a difficult decision but the right one from a business perspective. It’s always extremely difficult when people’s livelihoods are impacted. It was a decision not made lightly. But it was one of those things where we felt in order to emerge whole and to be able to serve dealers in 2023, it was an important decision.”

Through its proprietary, fully digital platform, Dealer Electronic Auto Loan System (DEALS), Car Capital came into the market saying it can allow dealer partners to approve 100% of their customers instantly, regardless of credit history.

With DEALS, Car Capital explained dealers have the ability to make 24/7 approval decisions based on the economics of each unique vehicle and consumer. And dealer partners get back-end profit based on performance, not a minimum portfolio size.