WESTLAKE VILLAGE, Calif. — A new study by J.D. Power and Associates revealed that dealer satisfaction with automotive financing lenders has increased in 2011 in the prime retail credit, retail leasing and floor planning areas, improving by 15 points, 13 points and 35 points, respectively.
Though captive finance providers are the highest performers in each area, J.D. Power’s 2011 U.S. Dealer Financing Satisfaction Study also showed that year-over-year improvement by non-captive lenders outpaced improvement by captives. Within the prime retail credit segment, banks such as Ally Financial, Bank of America, Citizens Auto Finance and SunTrust Bank have improved from 2011 at a considerably higher rate than the industry average.
Dealerships cited ease of conducting business, quick decisions and flexibility of programs and purchases as reasons for the improvements.
"The ongoing recovery of the automotive industry will continue to bring shifts in the lenders operating in this space, intensifying competition as lenders vie for new business," said Paul A. Cuevas, director of automotive finance at J.D. Power and Associates. "Lenders that provide a satisfying experience for dealers — whether captive or non-captive — are likely to benefit from a greater share of dealer business."
Historically low interest rates have played a role in changing the importance of various aspects of the dealer experience, according to the study. The importance of price has decreased while the people and processes dealers encounter while working with lenders have become more influential in satisfaction with the lending experience.
Providing a highly satisfying experience to dealers benefits lenders not only in terms of gaining greater volumes of dealer business, but also in commanding premium pricing, according to Cuervas.
The study also found that 56 percent of dealers said they would pay a higher buy rate to send business to a lender that provides them with a more satisfying experience. Additionally, approximately 21 percent of dealers surveyed said they would pay as much as 100 basis points more to work with a lender that provides a satisfying experience.
"Conventional wisdom says that a 'show me the money' attitude among dealers causes them to focus primarily on the best rate when selecting a lender," Cuevas said. "However, our study clearly shows that lenders can get more loan volume and better pricing by differentiating themselves through more seamless processes and better relationships with their dealers. As a result, better-performing lenders have the opportunity to enjoy higher levels of revenue growth and profitability as the health of the market continues to improve."
The study also suggests specific actions lenders can take to raise dealer satisfaction, including streamlining the approval and funding process, providing consistent contacts and messaging, and communicating with dealers through their preferred channels.
Coming in with identical scores, BMW Financial Services and Mercedes-Benz Financial Services (MBFS) ranked the highest with 959 points (based on a 1,000-point scale) each, according to the study. BMW Financial Services performed well in the application and approval process factor, while MBFS performed well in the provider offering factor. Ford Credit ranked No. 2 with 920 points, while Ally Financial improved more than any other lender in the segment with an increase of 113 points from 2010.
In the retail leasing segment, MBFS ranked highest with a score of 960 and performed well in the sales representative relationship factor. BMW Financial Services took the No. 2 spot with a score of 957, Ford Credit ranked third with a score of 914 and Ally Financial again improved more than any other lender in the segment with an increase of 104 points from 2010.
In the floor planning segment, MBFS ranked the highest with a score of 970, followed by BMW Financial Services (966) and Toyota Financial Services (943).
J.D. Power and Associate’s 2011 U.S. Dealer Financing Satisfaction Study is based on responses from 2,763 dealer principals who were surveyed between March and April 2011, according to the company.
Included in the study but not ranked due to small sample size are: Bank of the West; Kia Motors Finance; M&I Bank; M&T Bank; PNC Bank and Subaru Motors Finance.
Included in the study but not ranked due to small sample size are: Bank of America; Subaru Motors Finance; and Wells Fargo Dealer Services.
(1) No awards were presented in the subprime retail credit segment due to insufficient market representation.
Included in the study but not ranked due to small sample size are Bank of America; Chase Auto Finance; Nissan Motor Acceptance; Volkswagen Credit; and Wells Fargo Dealer Services.
