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J.D. Power: Speed No Longer Top Consideration When Selecting Finance Sources

August 15, 2016

DETROIT — When it comes to choosing lender partners, dealers value the type of relationship they have with their finance sources over the speed of their services, according to J.D. Power’s 2016 U.S. Dealer Financing Satisfaction Study.

Jim Houston, senior director of the automotive finance practice at J.D. Power, said finance sources need to shift from a transactional relationship with their dealers to a more consultative one.

“Speed has been king and the area lenders have traditionally focused on, but as the market gets tougher, lenders need to center their attention on their relationships with dealers, or they are going to lose business,” Houston said.

The first step to success, Houston noted, is communication. According to the study, fewer than half of dealers receive consistent sales rep calls or visits from their finance sources — both of which can boost overall satisfaction by as much as 6.8% and 7.5%, respectively. However, it’s not just about frequency, he added. The nature of the calls or visits is what really adds value to the relationship.

“Dealers value a lender that can help them handle the tough issues and solve those outside-the-box situations,” Houston said. “This is where having the right people focused on their dealers and helping them execute their strategic plan is essential.” 

There are three things that dealers want from their lenders but aren’t necessarily getting on a consistent basis, Houston noted. Dealers want their lenders to maintain consistent performance among their dealer relationship managers, identify their best dealers and prioritize those relationships, and to focus on areas most important to dealers. Finance sources that are able to meet these expectations, he added, will reap a greater share of the business.

The study also found that there was a correlation between high satisfaction ratings among finance sources and how much business dealers send to those respective lenders over the next year.

Sixty-two percent of dealers who indicated they were 90% or more satisfied with a lender said they would likely increase the amount of business they would send to that lender over the next year. However, as soon as satisfaction with a lender begins to dip, the expected increase in business drops dramatically. As soon as a lender’s satisfaction rating drops below 90% to 80%-89%, according to the study, the amount of dealers who indicate they’d send more business toward that lender plummets to 37%. That amount drops to 22% when satisfaction ratings drop to 70%-79%.

While the study found that speed was no longer the leading factor for dealers deciding on a lender partner, it still plays a significant role. Dealer satisfaction increases by as much as 6.4% when lenders fund error-free contracts the same day they are submitted, the study found. If lenders notify dealers of contract issues within four hours of submission, satisfaction increases by as much as 6%. Additionally, a well-managed exception process can increase overall satisfaction by up to 7.9%.

When it came to satisfaction ratings, Mercedes-Benz Financial Services and BMW Financial Services were the clear winners of the study. Mercedes-Benz Financial Services placed first across all three of the segments the study looked at: prime retail credit, retail leasing and floor planning. BMW Financial Services placed second across all segments.  

The 2016 U.S. Dealer Financing Satisfaction Study captured more than 20,000 finance provider evaluations across four segments. The evaluations were provided by 3,100 new-vehicle dealerships in the United States.

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