In an article published by SubPrime Auto Finance News, J.D. Power and Associates have discovered that dealer satisfaction with lenders declined “considerably” from 2008 in all four segments reviewed in the Dealer Financing Satisfaction Study. Is it any wonder that this occurred when all the lenders are holding on to their cash tighter than a 5 year old holding a Popsicle? I’ve had conversations with dealerships who have shared with me that as long as the financing customer has a 740+ FICO, they can get financing but if not, they can forget it.
The study examined five key factors to contribute to satisfaction within the prime retail credit, subprime retail credit and retail leasing segments: provider offerings, credit personnel, application/approval process, termination policy/service and sales representative relationship. Three factors were measured in the floor-planning segment: provider offering; floor-plan support personnel and process/service.
The study was based on responses from more than 2,000 dealer principals who were surveyed between April and May of this year.
On a 1,000-point scale J.D. Power found:
Prime Retail Credit (down 46 points)
Subprime Retail Credit (down 76 points)
Retail Leasing (down 79 points)
Floor Planning (down 90 points)
The retail financing experience account for more than two-thirds of dealer satisfaction. Meanwhile, offerings such as rates account for less than one-third of overall satisfaction. While recognizing that the past year has been tough for dealers, J.D. Power executives advised, “This indicates an opportunity for lenders to differentiate themselves through service, even though external market forces are driving a more conservative lending approach.” I just love the “more conservative lending approach,” don’t you?
David Lo, director of financial services as J.D. Power, explained it this way, “Current economic conditions have created something of a ‘perfect storm’ as declines in new-vehicle sales, tightened lending and reduced inventory funds have combined to put extreme stress on dealer business.”
“However, the fundamental principles of service are unchanged. Lenders that focus on prompt application and funding turnaround times, have credit buyers that demonstrate willingness to worth with their clients and have sales representatives who are skilled in relationship management may position themselves to be a lender of choice,” he continued. This is actually pretty significant. One of these days lenders will clamor around the dealerships, if not the buying consumers, and be happy to lend money again. LOL, that sure sounds so funny to me.
This is interesting as well; Basically, the study discovered that higher levels of satisfaction may positively impact the amount of a business a lender receives from a dealer. For instance, for the lenders in the prime retail segment whose satisfaction scores averaged 712 on a 1,000-point scale, 22 percent of dealers say they “definitely will” increase their business with this organization.
However, of the lenders whose satisfaction scores averaged 886, 46 percent of dealers said they “definitely will” increase business with that lender. Lo noted, “High-performing lenders tend to close a higher proportion of deals. This is critical right now, and almost more importantly, may serve as a foundation for growth one the market stabilizes.”
Prime Retail Credit
Taking the top spot in the prime retail credit segment was Mercedes-Benz Financial with an index score of 918. Officials said this company performed particularly well in two areas, provider offerings and credit personnel. The prime retail credit company averages of a few sample lenders are as follows:
Mercedes-Benz Financial: 918
BMW Financial Services: 898
Toyota Financial Services: 873
Audi Financial Services: 838
Honda Financial Services: 831
Wachovia Dealer Services: 814
Ford Credit: 802
Bank of America: 787
Chase Auto Finance: 772
US Bank: 744
Capital One Auto Finance: 732
Chrysler Financial: 665
Subprime Retail Credit
Interestingly enough, J.D. Power said that no awards were presented in the subprime retail credit segment due to insufficient market representation.
The rest of the detail is not that interesting so I won’t go into it. I don’t know about you but let’s hope that this ‘Perfect Storm’ ends soon. I’d like to see the supply of financing start to meet the demand of the applicants. No doubt it will take time but I speak for myself when I say I’m getting a little impatient!