Dealer Satisfaction Boosts Auto Lender Revenues

August 11, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Automotive | Data-driven | Financial Services | Retail & E-Commerce

Lenders who are successful in satisfying automotive dealers by meeting key performance expectations are more likely to capture a greater share of preferred loan applications from their dealer network, which can drive higher levels of revenue and profitability, according to the J.D. Power and Associates 2010 U.S. Dealer Financing Satisfaction Study.

Satisfied Dealers Spur Lender Business
The study finds that within the prime retail credit segment, lenders with a highly satisfied dealer network (scores of 901 or higher on a 1,000-point scale) successfully book a higher portion of applications they review–55%, compared with 25% among dealers with low satisfaction (scores of 700 or lower).

Similarly, lenders with highly satisfied dealers also close a greater percentage of the loans they approve (77% compared to 46% among low-satisfaction dealers). As a result, lenders delivering higher satisfaction are spending less on processing new loans and also obtaining higher risk-adjusted returns.

In addition, highly satisfied dealers send more of their current business (40%) to lenders that deliver a satisfying experience. In comparison, dealers with low levels of satisfaction send just 20% of business to their lenders.

Highly satisfied dealers are also more likely to send a greater proportion of business to their lender in the future. Sixty percent of highly satisfied dealers say they “definitely will” increase the percentage of business sent to the lender, while just 12% of dealers with low satisfaction say the same.

The study finds that overall satisfaction and ultimately, business results are driven by lenders meeting a set of key performance indicators with three common themes: establishing proactive and ongoing lines of communication; improving speed and flexibility of approval and funding process; and providing satisfying interactions with dealers.

Overall Dealer Satisfaction Grows
The study finds that in all four segments examined, overall dealer satisfaction with lenders has increased considerably from the low levels observed in 2009. In the prime retail segment, dealer satisfaction increased from a score of 749 on a 1,000-point scale in 2009 to 847. In the subprime retail segment, dealer satisfaction grew from 717 to 767, and dealer satisfaction increased from 774 to 864 in the retail leasing segment. And in the floor planning segment, dealer satisfaction grew from 802 to 868.

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The study examines dealer satisfaction with finance lenders in four segments: prime retail credit; subprime retail credit; retail leasing; and floor planning. It examines three key factors that contribute to satisfaction within the prime retail credit and subprime retail credit segments: provider offering; application/approval process; and sales representative relationship.

Four factors are measured in the retail leasing segment: provider offering; application/approval process; sales representative relationship; and vehicle return process. Three factors are measured in the floor planning segment: finance provider credit line; floor plan support; and floor plan portfolio management.

Rankings by segment are as follows:

Alphera Leads Prime Retail Credit Segment
Alphera Financial Services ranks highest in the prime retail credit segment with an index score of 956 and performs particularly well in the sales representative relationship. BMW Financial Services (947) and Mercedes-Benz Financial (937) follow in the rankings. The average score in this segment was 847.

BMW Top Retail Leasing Lender
For a seventh consecutive year, BMW Financial Services ranks highest in the retail leasing segment with a score of 944 and performs particularly well in the application/approval process. Mercedes-Benz Financial follows closely with a score of 942. Audi Financial Services ranks third with 900. The average score in this segment was 864.

BMW Also Leads Floor Planning Segment
BMW Financial Services ranks highest in the floor planning segment with a score of 962, followed by Mercedes-Benz Financial (952) and Toyota Financial Services (919). The average score in this segment was 868.

Domestic Autos Have Higher Appeal
For the first time since 1997, domestic auto brands, collectively, have surpassed import brands as a whole in vehicle appeal, according to the J.D. Power and Associates 2010 Automotive Performance, Execution and Layout (APEAL) Study.

Domestic brands have been improving steadily in vehicle appeal during the past four years, with the greatest improvement occurring between 2008 and 2010. In 2010, the APEAL score for US domestic brands averages 787 on a 1,000-point scale; 13 points higher than the score for import brands (automakers headquartered in Europe or Asia Pacific). By comparison, in 2009, import brands outpaced domestic brands by five points.

About the Data: The 2010 U.S. Dealer Financing Satisfaction Study is based on responses from 2,557 dealer principals who were surveyed between March and April 2010. J .D. Power and Associates is the publisher of the enclosed chart, which is taken from The 2010 US National Auto Insurance Study.

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