With technology leveling the playing field to a degree, relationships nowadays really matter, especially when they involve how a dealer is going to get a delivery bought for their customers or how they’re going to have the floor planning for inventory.
The J.D. Power 2016 U.S. Dealer Financing Satisfaction Study determined the relationships auto finance providers develop with dealerships are critical to dealer satisfaction and to remaining competitive in the market, especially as the new-vehicle sales market tightens.
J.D. Power insisted a combination of “slowing” new-vehicle sales and an “uncertain” used-vehicle market is contributing to an already contested auto-lending environment. Analysts acknowledged technology has eliminated disparity of speed in financing, leaving finance companies to differentiate themselves by the relationship they are able to form with the dealership.
“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," said Jim Houston, senior director of the automotive finance practice at J.D. Power.
“Lenders need to move beyond a transactional relationship with dealers to a richer consultative partnership,” Houston continued. “Lenders with a dealer-centric culture across their organization — not just in various pockets of the business — are the ones that are most likely to excel.”
Houston noted that in building a dealer-centric culture, finance companies must understand their dealers’ businesses and goals, which helps establish them in the eyes of dealers as their business partner and problem solver. That starts with communication with the dealer.
The study indicated that fewer than half of dealers receive consistent sales rep calls or visits, both of which can boost overall satisfaction by as much as 68 points and 75 points, respectively, on a 1,000-point scale. But it's more than just the frequency of the , it's the nature of those touch points that 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."
Opportunities to excel and grow business
The study identified three areas of opportunity for finance companies that will help them enhance their dealer relationships. They included:
1. Consistent performance among their dealer relationship managers
2. Identification of their best dealers and a prioritization of those relationships
3. Efforts that focus on areas most important to dealers
“These are the things dealers say they want from their lenders, but are not necessarily getting on a consistent basis,” Houston said. “When the market gets tough, lenders that meet dealer expectations are going to get a greater share of the business.”
Findings of the study showed that high satisfaction with finance companies leads dealers to increase the amount of business they send to those respective lenders over the next year. Falloff is swift when satisfaction declines.
When satisfaction scores are 900 points or higher, J.D. Power found 62 percent of dealers say they are likely to increase the amount of business they send to the lender over the next year.
When satisfaction falls to between 800 and 889, J.D. Power noticed only 37 percent of dealers indicate they intend to send more business to that finance company.
When satisfaction dips to 700-799, J.D. Power said only 22 percent of dealers intend to increase business with that finance company.
Analysts mentioned two other key findings from the study, which included:
—Speed still matters: Speed still plays a significant role when dealers are choosing lending partners.
When finance companies fund error-free contracts on the same day as they are submitted, dealer satisfaction increases by as much as 64 points.
When finance companies notify dealers of contract issues or errors within four hours after they are submitted, satisfaction increases by as much as 60 points.
—Exceptions to the rule: Dealers want their lending partners to value the total relationship. In some cases, this means providing exceptions when warranted.
A well-managed exception process can increase overall satisfaction by up to 79 points.
Dealer financing satisfaction rankings
German luxury brand captives dominated the dealer rankings.
Mercedes-Benz Financial Services ranked highest among lenders in the prime retail credit segment for a second consecutive year with a score of 961. Following in the rankings were BMW Financial Services (959), Alphera Financial Services (941), Lincoln Automotive Financial Services (936) and Infiniti Financial Services (930).
Mercedes-Benz Financial Services also ranked highest among finance companies in the retail leasing segment for a second consecutive year with a score of 982. Following in the rankings were BMW Financial Services (958), Ford Credit (913), Volvo Car Financial Services (912) and Subaru Motors Finance (911).
And making it a sweep for the captive, Mercedes-Benz Financial Services ranked highest among floor planning providers for a sixth consecutive year with a score of 986. Following in the rankings were BMW Financial Services (975), Huntington National Bank (969), Hyundai Motor Finance (945) and Kia Motors Finance (945).
J.D. Power explained satisfaction is measured across three factors in the prime and non-prime retail credit segments: finance provider offerings, application and approval process, and sales representative relationship.
Four factors are measured in the retail leasing segment: finance provider offerings, application and approval process, sales representative relationship and vehicle return process.
Four factors are measured in the floor planning segment: finance provider credit line, floor plan support, sales representative relationship, and floor plan portfolio management.
The 2016 U.S. Dealer Financing Satisfaction Study captures more than 20,000 finance provider evaluations across the four segments. These evaluations were provided by 3,100 new-vehicle dealerships in the United States. More details can be found here.
Prime retail credit overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 961
BMW Financial Services: 959
Alphera Financial Services: 941
Lincoln Automotive Financial Services: 936
Infiniti Financial Services: 930
Subaru Motors Finance: 908
Jaguar Financial Group: 902
Chase Automotive Finance: 895
Land Rover Financial Group: 891
Huntington National Bank: 890
Volvo Car Financial Services: 890
Ford Credit: 888
Citizens One: 875
TD Auto Finance: 874
Ally Financial: 873
Mazda Capital Services: 873
Volkswagen Credit: 873
Industry Average: 868
Capital One Auto Finance: 867
Fifth Third Bank: 867
Bank of America: 866
SunTrust Bank: 864
Toyota Financial Services: 860
Kia Motors Finance: 859
Wells Fargo Dealer Services: 853
PNC Bank: 851
BMO Harris Bank: 844
US Bank: 835
Bank of The West: 822
Hyundai Motor Finance: 821
GM Financial: 815
Credit Union Direct Lending: 813
Honda Financial Services: 813
Chrysler Capital: 798
Note: Included in the study but not ranked due to small sample size are Acura Financial Services, Alaska USA Federal Credit Union, Fidelity Bank, First Niagara Bank, Gateway One Lending & Finance, MINI Financial Services, Santander Auto Finance and Security Service Federal CU.
Retail leasing overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 982
BMW Financial Services: 958
Ford Credit: 913
Volvo Car Financial Services: 912
Subaru Motors Finance: 911
Land Rover Financial Group: 891
Jaguar Financial Group: 890
Mazda Capital Services: 886
Industry Average: 885
Toyota Financial Services: 869
Kia Motors Finance: 868
Honda Financial Services: 866
US Bank: 863
Ally Financial: 851
GM Financial: 843
Hyundai Motor Finance: 835
Chrysler Capital: 828
Note: Included in the study but not ranked due to small sample size are Infiniti Financial Services, Lincoln Automotive Financial Services, MINI Financial Services and Volkswagen Credit.
Floor planning overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 986
BMW Financial Services: 975
Huntington National Bank: 969
Hyundai Motor Finance: 945
Kia Motors Finance: 945
Ford Credit: 944
Chase Automotive Finance: 941
Industry Average: 938
Ally Financial: 935
Bank of America: 927
GM Financial: 926
Toyota Financial Services: 899
Chrysler Capital: 897
Note: Included in the study but not ranked due to small sample size are PNC Bank, Volkswagen Credit and Wells Fargo Dealer Services.