WESTLAKE VILLAGE, Calif. — In the highly competitive auto lending environment, the level of service provided — including technology and a collaborative and consultative staff — is more important than price, according to the J.D. Power 2015 U.S. Dealer Financing Satisfaction Study, which found that dealers are willing to pay a premium for high-quality service.
The study measured dealer satisfaction with finance providers in four segments: prime retail credit; non-prime retail credit; retail leasing; and floor planning. Satisfaction was calculated on a 1,000-point scale. Dealer satisfaction in the prime retail credit segment is 868, and in the non-prime retail credit segment satisfaction is 828. Dealer satisfaction in the retail leasing segment is 894, while in the floor planning segment, satisfaction is 943.
While dealerships continue to seek ways to improve their margins, they also seek providers to speed customer throughput in the sale or lease of their vehicles, and in many instances are willing to pay a premium for a higher-quality financing experience. Sixty-three percent of dealers are willing to pay an additional 0.50-0.60 basis points on their loan terms (down 4 percentage points from 2014) to receive good service from their lenders in the prime retail credit segment.
The auto industry works hard to establish high-value, one-on-one relationships with their customers when it comes to the sales and service processes. The same principle applies to dealers when it comes to the relationship with their lenders in all consumer-facing products — prime retail credit, non-prime retail credit and retail leasing. Auto lending continues to be a relationship business. Findings of the study show that assigning/aligning dedicated underwriters positively impacts dealer satisfaction by providing higher levels of service and collaboration. And a majority of dealers (84%) indicated that their lenders provided a dedicated underwriter person and or team who contacted them frequently, providing valued-added communications. The study also found that dealerships retained 59% of their leasing customers through retention programs and consumer guidance provided by their lender.
A dealer-focused sales rep relationship has a positive effect on satisfaction and retail contract volume. When a high level of sales rep service is provided, satisfaction is substantially higher than when there is no focused support (935 vs. 754, respectively). Among dealers with a focused relationship in which all sales rep relationship key performance indicators (KPIs) are met, 68% say they “definitely will” increase the percentage of business they conduct with their provider. Overall satisfaction is highest when sales reps engage in discussions about customer retention (922), dealership performance consulting (916) and training and clarification of programs (916), compared with when they do not (831, 818 and 816, respectively).
“Speed of funding has become a critical differentiator in the eyes of the dealer as efficient cash flow is demanded by dealer management, not absolute finance and insurance income,” said Michael Buckingham, senior director of the auto finance practice at J.D. Power. “Fast application processing allowing dealers to speed the customer delivery process is also critical. Auto dealers are willing to pay a price premium for these services.”
Dealers don’t want loan processors; they want collaborative consultants who can support them every step of the way. High-performing lenders provide a range of services that resonates with dealers, which include helping them understand the variety of lending options available and how they can maximize profits, reduce expenses and retain customers.
In the floor planning segment, J.D. Power found that 85% of dealers are assigned a primary support representative or team who can quickly respond to their needs and questions. Additionally, 75% of dealers indicate being able to immediately reach their support staff. When this occurs, satisfaction is 975. When dealers have to wait one hour to reach their support staff, satisfaction declines significantly to 938. Plus, three-fourths (75%) of dealers indicated increasing retail business with their provider because of their floor planning relationship.
The study also touched on eContracting. When dealers use eContracting or a proprietary technology provided by their lender, overall satisfaction averages 913, compared with 856 when lenders do not use this service. Additionally, 56% of dealers indicate that faster funding time is the main reason to use eContracting. On average, there is a 39% increase in dealers’ business with their finance provider due to eContracting.
J.D. Power also ranked lenders and found that Mercedes-Benz Financial Services ranks highest among lenders in the prime retail credit segment, with a score of 971. Following in the rankings are MINI Financial Services (962) and Alphera Financial Services (961).
Mercedes-Benz Financial Services also topped the list in the retail leasing segment, with a score of 978. Following in the rankings are BMW Financial Services (961) and Lincoln Automotive Financial Services (956). The same went for floor planning lenders. Mercedes-Benz Financial Services ranked highest for a fifth consecutive year, with a score of 986, followed by are BMW Financial Services (974) and Ford Credit (961).