J.D. Power: Prime Auto Lenders Expanding Spectrum to Subprime

WESTLAKE VILLAGE, Calif. — Although challenges abound in the subprime housing market, many auto lenders are rolling out full-spectrum credit, covering prime and subprime customers, as competition heats up for market share and dealers demand more services, according to J.D. Power and Associates in its 2007 Dealer Financing Satisfaction Study.

The study found that many prime auto lenders are transitioning to the subprime market, with 57 percent of dealers reporting that they are using traditionally prime lenders for subprime customers.

On the other hand, 33 percent of dealers said they are going through subprime lenders for their prime customers, executives indicated.

"The challenges that subprime lenders are facing while breaking into the prime market are not surprising given that captive finance providers dominate much of the prime new-vehicle financing market," explained David Lo, director of automotive finance and investment services as J.D. Power.

"It is important for these traditional subprime lenders moving into the prime space to consider both price and service within their full-spectrum program. While competitive pricing is an entry point for these lenders, service is the key to long-term strategy," he highlighted.

The company also discovered that many non-captive lenders appear to be engaging new-vehicle shoppers before they even enter a store, with one in five dealers indicating that the number of loans financed directly and without their assistance has increased in the past 12 months.

"While direct lending is a viable strategy to gain share, non-captive finance providers walk a fine line between capturing new business through direct lending and compromising their relationship with the dealer, as many dealers report that direct lending negatively impacts the amount of business they receive," Lo pointed out.

Breaking down lender scores, J.D. Power said that BMW Financial Services ranked highest in retail leasing satisfaction for the fourth year in a row, excelling in all areas of dealer satisfaction, including finance provider offering, termination policy/service, application and approval process, in addition to credit personnel. BMW Financial Services capture a score of 954 out of a possible 1,000.

"This highest ranking recognizes our consistently high performance in an area that represents a significant part of our business," explained Edward Robinson, president and chief executive officer of BMW Financial Services.

"We are proud that our high standards and commitment to our dealer network have been recognized for the fourth consecutive year. Our dealer relationships are the foundation of our business success," he noted.

After BMW Financial Services was Mercedes-Benz Financial at 948 and GMAC at 934.

Meanwhile, Franz Reinder, vice president of Mercedes-Benz Financial, said, "These results will reinforce the commitment of all Mercedes-Benz Financial employees to deliver benchmark products and services that help strengthen relationships between Mercedes-Benz dealerships and their customers."

J.D. Power reported that Mercedes-Benz Financial showed "considerable" improvement throughout all financing areas since last analyzed in 2006. Officials found that Mercedes-Benz ranked highest in the prime retail credit segment with a score of 948. BMW Financial Services came in second with 947 points, followed by Toyota Financial Services at third.

Additionally, executives found that Mercedes-Benz also ranked top of the pack in floor planning for the second year in a row, coming in at 966 points. The company said Mercedes-Benz performed particularly well in each of the three floor-plan areas, including finance provider offering, process and service, along with floor-plan support personnel.

Chase Auto Finance followed Mercedes-Benz with 959 points, and next came Volkswagen Credit with 954 points.

"The J.D. Power and Associates Dealer Financing Satisfaction Study is an important tool for measuring our customer service progress and identifying opportunities for improvement," pointed out Reiner, of Mercedes-Benz Financial.

"As a result of our dealer back, we continue to gain valuable insight into how our service should evolve in a market that grows increasingly competitive," he added.

To rank the lenders, J.D. Power said it questioned 4,845 dealer principals between March and May 2007.

 Retail Leasing Satisfaction Index Ranking

  (Based on a 1,000-point scale)

  BMW Financial Services: 954

  Mercedes-Benz Financial: 948

  GMAC: 934

  Audi Financial Services: 931

  Honda Financial Services: 923

  Toyota Financial Services: 910

  Nissan Motor Acceptance: 904

  Chrysler Financial: 901

  Volkswagen Credit: 892

  Retail Leasing Segment Average: 892

  Subaru Motors Finance: 867

  Huntington National Bank: 865

  Ford Credit: 854

  Mazda American Credit: 852

  Chase Auto Finance: 830

  Fifth Third Bank: 811

  Wells Fargo Auto Finance: 807

  US Bank: 797

  Hyundai Motor Finance Co.: 765 

(Included in the study but not ranked due to small sample size are: Bank of the West, Porsche Financial Services, Suzuki Financial Services and Volvo Car Finance.)

 

 Retail Credit Satisfaction Index Ranking

  (Based on a 1,000-point scale)

  Mercedes-Benz Financial: 948

  BMW Financial Services: 947

  Toyota Financial Services: 941

  GMAC: 935

  Audi Financial Services: 926

  Nuvell Credit: 923

  Volkswagen Credit: 918

  Chrysler Financial: 914

  Honda Financial Services: 909

  Branch Banking and Trust: 898

  Regions/AMSouth: 896

  Subaru Motors Finance: 895

  SunTrust Bank: 890

  Nissan Motor Acceptance: 889

  First Citizens Bank: 887

  Prime Retail Credit Segment Average: 886

  Compass Bank: 885

  M&I Bank: 885

  Wachovia Dealer Services/WFS Financial: 885

  Sovereign Bank: 880

  Huntington National Bank: 879

  TD Banknorth: 878

  Chase Auto Finance: 873

  CitiFinancial Auto: 869

  Harris Bank: 869

  Bank of America: 868

  Fifth Third Bank: 866

  Ford Credit: 857

  M&T Bank: 851

  Citizens/Charter One Auto Finance: 849

  Wells Fargo Auto Finance: 849

  Capital One Auto Finance: 848

  Citizens Bank: 846

  Mazda American Credit: 843

  US Bank: 829

  AmeriCredit: 801

  Hyundai Motor Finance Co.: 798

  Bank of the West: 780

(Included in the study but not ranked due to small sample size are: First National, HSBC Auto Finance, Infiniti Financial Services, PNC Bank, Suzuki Financial Services, Trustmark National Bank and Volvo Car Finance.) 

  
 Floor Planning Satisfaction Index Ranking

  (Based on a 1,000-point scale)

  Mercedes-Benz Financial: 966

  Chase Auto Finance: 959

  Volkswagen Credit: 954

  Toyota Financial Services: 951

  GMAC: 941

  Nissan Motor Acceptance: 938

  Bank of America: 935

  Floor-Planning Segment Average: 929

  Chrysler Financial: 914

  Ford Credit: 884

(Included in the study but not ranked due to small sample size are: Audi Financial Services, BMW Financial Services, Comerica Bank, Fifth Third Bank, Honda Financial Services, Wachovia Dealer Services/WFS Financial and Wells Fargo Auto Finance.)