J.D. Power: Dealers Will Pay Premium for Good Service from Lenders
Sixty-six percent of dealers who were surveyed indicated that they are willing to pay as much as an additional 0.50 to 0.60 basis points on their loan terms to receive good service from their lenders.
WESTLAKE VILLAGE, Calif. — New-vehicle dealerships place such a value on the relationship they have with their prime retail credit finance providers that two-thirds are willing to pay a premium for good service, according to the J.D. Power 2014 U.S. Dealer Financing Satisfaction Study.
Released this week, the study showed that service and relationships dealers have with their finance providers matter enough that 66% of dealerships are willing to pay as much as an additional 0.50 to 0.60 basis points on their loan terms to receive good service from their lenders.
“Auto lending is a relationship business, and the key to success for lenders is to provide dealers with the best support and quickest response times possible,” said Michael Buckingham, senior director of the auto finance practice at J.D Power. “Dealerships want lenders that focus on building strong relationships and that provide a wide array of financing options for vehicle buyers. These fundamentals hold true for all auto financing products.”
Buckingham noted that dealers financing the three consumer-facing products — prime loan, leasing and non-prime — covet lenders that offer a dedicated credit underwriter and sales representative in order to maintain a level of familiarity, which they believe provides them better and faster service. Even if a credit underwriter team supports a dealership, providing a primary contact for the dealership solidifies the relationship. In the floor planning segment, dealers seek a responsive and knowledgeable servicing team along with a proactive sales team to help them manage their inventory and expense.
The study examined dealer satisfaction with lenders in four finance segments: prime retail credit, non-prime retail credit, retail leasing and floor planning. The study is based on responses from 3,037 dealers who were surveyed between March and April 2014.
In the floor planning segment, satisfaction is 937, while satisfaction in retail leasing averages 899. Satisfaction in the prime retail credit segment is 866, while non-prime retail credit satisfaction is 827.
J.D. Power also found that MINI Financial Services ranked highest among lenders in the prime retail credit segment with a score of 968. Following in the rankings are BMW Financial Services (961) and Alphera Financial Services (952). In the retail leasing segment, BMW Financial Services ranked highest for the third consecutive year, with a score of 975. Following in the rankings are MINI Financial Services (970) and Mercedes-Benz Financial (965).
Mercedes-Benz Financial ranked highest among floorplanning lenders for a fourth consecutive year, with a score of 972. Following in the rankings are BMW Financial Services (964) and Hyundai Motor Finance (961).
The study also found that e-contracting increases dealer satisfaction. When lenders use eContracting, overall satisfaction averages 892 (on a 1,000-point scale), compared with 858 when lenders do not use that service. Additionally, because of the ease and speed it provides, dealers are more likely to increase their business with lenders that offer e-contracting (35%).
Auto dealers in retail leasing keep 62% of their prior leasing customers through retention programs and consumer guidance provided by their lender. More than two-thirds (68%) of dealers indicate they increased retail business with their provider because of their floorplanning relationship.
And in the non-prime credit segment, the competitiveness of vehicle advance is the most important component of provider offerings.
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