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Auto Finance Lenders Exploring Full-Spectrum Strategies

August 24, 2007

WESTLAKE VILLAGE, Calif. — As competition in the auto finance market intensifies, many lenders are deploying full-spectrum strategies, which consists of lenders servicing both prime and sub-prime customers, to increase volume and market share and to improve service to their dealers, according to the J.D. Power and Associates 2007 Dealer Financing Satisfaction Study.

The study finds that many prime finance providers are making the transition to the sub-prime market, with 57 percent of dealers utilizing traditionally prime lenders for sub-prime customers. Conversely, only 33 percent of dealers report using traditional sub-prime lender services for their prime customers.

In addition to the rise in full-spectrum lending efforts, non-captive finance providers appear to be engaging new-vehicle shoppers before they even enter the dealership, as one in five dealers report that the number of loans financed directly and without their assistance has increased during the past 12 months.

With a score of 954 points on a 1,000-point scale, BMW Financial Services ranks highest in retail leasing satisfaction for a fourth consecutive year, performing particularly well in all drivers of dealer satisfaction: finance provider offering; termination policy/service; application/approval process; and credit personnel. Mercedes-Benz Financial (948) and GMAC (934) follow BMW Financial Services in the retail leasing segment.

With considerable improvements across all financing areas since the 2006 study, Mercedes-Benz Financial ranks highest in the prime retail credit segment in 2007 with a score of 948. BMW Financial Services closely follows with 947 points, and Toyota Financial Services ranks third in the segment with 941.

Mercedes-Benz also ranks highest in floor planning for a second consecutive year with 966 points, performing particularly well in each of the three floor plan satisfaction factors: finance provider offering; process and service; and floor plan support personnel. Chase Auto Finance (959) and Volkswagen Credit (954) follow in the segment.

The 2007 Dealer Finance Satisfaction Study is based on responses from 4,845 dealer principals who were surveyed between March and May 2007. To review the entire full-spectrum and direct lending management discussion, please click the following link: http://www.jdpower.com/corporate/library/download/?files=9927502.

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