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Dealer Satisfaction With Lenders Improves, Survey Says

Lenders who are successful in satisfying automotive dealers by meeting key performance expectations are more likely to capture a greater share of preferred loan applications from their dealer network, according to the J.D. Power and Associates 2010 U.S. Dealer Financing Satisfaction Study.

by Staff
August 3, 2010
4 min to read


WESTLAKE VILLAGE, Calif. — Lenders who are successful in satisfying automotive dealers by meeting key performance expectations are more likely to capture a greater share of preferred loan applications from their dealer network, according to the J.D. Power and Associates 2010 U.S. Dealer Financing Satisfaction Study.

The study finds that within the prime retail credit segment, lenders with a highly satisfied dealer network (scores of 901 or higher on a 1,000-point scale) successfully book a higher portion of applications they review — 55 percent, compared with 25 percent among dealers with low satisfaction (scores of 700 or lower). Similarly, lenders with highly satisfied dealers also close a greater percentage of the loans they approve (77 percent versus 46 percent among low-satisfaction dealers). As a result, lenders delivering higher satisfaction are spending less on processing new loans and also enjoying higher risk-adjusted returns.

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In addition, highly satisfied dealers send more of their current business (40 percent) to lenders that deliver a satisfying experience. In comparison, dealers with low levels of satisfaction send just 20 percent of business to their lenders. Highly satisfied dealers are also more likely to send a greater proportion of business to their lender in the future. Sixty percent of highly satisfied dealers say they “definitely will” increase the percentage of business sent to the lender, while just 12 percent of dealers with low satisfaction say the same.

The study finds that overall satisfaction and ultimately, business results are driven by lenders that meet these three common themes: establishing proactive and ongoing lines of communication; improving speed and flexibility of approval and funding process; and providing satisfying interactions with dealers.   

“As the market shows signs of recovery, those lenders that have continued to focus on communication — specifically about process changes that have been implemented as a result of recent economic challenges — and building strong relationships with their dealer network have more effectively managed dealer expectations,” said Paul A. Cuevas, director of automotive finance at J.D. Power and Associates. “In doing so, these lenders have positioned themselves to be the lender of choice and capture more business.”

While dealers have traditionally had strong ties with their captive finance lenders, the 2010 study reflected a deepening of relationships between banks and dealers, largely as a result of economic challenges facing captives and the willingness of banks to meet critical dealer financing needs.

“Banks have helped to fill the void in the retail and floor plan markets created by the captive lending uncertainty and turmoil in the securitization market,” said Cuevas. “Even in the highly commoditized prime retail credit space, banks that provide a more highly satisfying experience benefit from dealers sending more business their way, which increases profitability. For example, deals booked with Huntington National Bank in 2009 with similar credit scores, loan percent to collateral value, term and down payments have buy rates that are 20 to 50 basis points higher compared with other banks competing in the prime space. This is a clear example of the considerable impact improving dealer satisfaction can have, regardless of provider segment or consumer credit.”

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The study also finds that in all four segments examined, overall dealer satisfaction with lenders has increased considerably from the low levels observed in 2009.

Comparison of Overall Satisfaction Scores by Segment, 2009-2010
(on a 1,000-point scale)

Segment

2009

2010

Difference

Prime retail credit

789

847

+58 points

Subprime retail credit

717

767

+50 points

Retail leasing

774

864

+90 points

Floor planning

802

868

+66 points

Rankings by segment are as follows:

Prime Retail Credit
Alphera Financial Services ranks highest in the prime retail credit segment with an index score of 956 and performs particularly well in the sales representative relationship. BMW Financial Services (947) and Mercedes-Benz Financial (937) follow in the rankings.

Retail Leasing
For a seventh consecutive year, BMW Financial Services ranks highest in the retail leasing segment with a score of 944 and performs particularly well in the application/approval process. Mercedes-Benz Financial follows closely with a score of 942. Audi Financial Services ranks third with 900.

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Floor Planning
BMW Financial Services ranks highest in the floor planning segment with a score of 962, followed by Mercedes-Benz Financial (952) and Toyota Financial Services (919).

The 2010 U.S. Dealer Financing Satisfaction Study is based on responses from 2,557 dealer principals who were surveyed between March and April 2010.

To view the study's complete rankings, click here.

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