WESTLAKE VILLAGE, Calif. — While dealers in Canada are becoming more and more satisfied with the country's overall financing business, J.D. Power and Associates has found that the strides made in the subprime retail credit segment stand out above the rest of the lending business.

Recently releasing its 2012 Canadian Dealer Financing Satisfaction Study, J.D. Power said that on a 1,000-point scale, subprime retail credit providers earned a satisfaction score of 827 this year.

This 61-index-point uptick from 2011 was the strongest improvement out of all four segments included in the study, which also examined Canada's prime retail credit, retail leasing and floor planning sectors.

When asked was led to dealer satisfaction with the subprime retail credit providers making such strong gains, Paul Cuevas — director of global automotive finance at J.D. Power — offered a breakdown of the three factors influencing subprime satisfaction: finance provider offering, application/approval process & sales representative relationship.

The application/approval process has a 41-percent weighting in the overall score, which is roughly the same as last year, he said. The sales representative relationship factor was down slightly this year at 25 percent.

Meanwhile, the influence of the finance provider offering in determining dealer satisfaction with subprime retail lenders climbed four points to 34 percent, Cuevas emphasized.

"So, in points, how that impacted the score difference from year-to-year for the two primary subprime  lenders … the provider offering was up most significantly, specifically the level of importance and how dealers rated the professionalism of the credit staff and the flexibility of their buying policies," he explained.

"That's really what drove those two lenders' scores up," Cuevas added, referring to Scotia Dealer Advantage and TD Auto Finance.

But while the subprime sector may lead the pack, J.D. Power emphasized that "dealer satisfaction has increased substantially across all four segments."

The floor planning segment jumped from 851 last year to 889 this year, while prime retail credit climbed 18 points to 859. Retail leasing jumped 29 points to 834.

Interestingly enough, it was shown that "the helpfulness of credit staff and their responsiveness to questions" was a key driver in all four areas.

"Few lenders will be able to sustain, not to mention grow, their vehicle financing business without taking care of the dealers," stated Lubo Li, who is senior director and financial services practice leader at J.D. Power, Toronto.

"Simply meeting dealer expectations with product offerings is not enough," Li continued. "Developing a rapport with the dealer, understanding their needs and responding accordingly, is what creates dealer loyalty, which in turn increases revenue potential through increases in future business for the lender."

J.D. Power Touts Top Canadian Lenders

The study also looked at the individual lenders that are leading the respective financial segments in Canada.

Although not publishing the category leader for subprime — given the small sample size — J.D. Power indicated that one lender took top honors in two of the remaining three segments.

Specifically, Mercedes-Benz Financial Services had the highest satisfaction score in both the prime retail credit (958 out of 1,000) and retail leasing (950) segments.

"Everybody in our organization shares in this success," stated Stefan Karrenbauer, the president and chief executive officer of Mercedes-Benz Financial Services Canada. "Our entire team works very hard day in and day out to deliver the best level of service to our dealers and they should be commended for this great display of teamwork."

Meanwhile, Ford Credit Canada led the way in floor planning satisfaction with a score of 933.

Further Satisfaction Score Breakdowns

Analysts also broke down overall satisfaction numbers by banks and captives. Dealer financing satisfaction with banks jumped from 847 a year ago to 872 this time around. Meanwhile, dealer satisfaction with captives jumped from 833 to 840.

Discussing the bank element in more detail, officials noted: "While satisfaction with banks is increasing, so is the volume of business dealers are sending their way. Banks' share of the dealer financing business has increased to 60.5 percent in 2012, up 4.7 percent from 2011."

Citing its data from its Power Information Network, they shared that market share for captives is now at 36.3 percent, a 1.5-percent year-over-year decrease.

"Auto lending is a very competitive market, and we're finding that more dealers this year are using multiple providers, particularly bank providers, than in 2011," Li shared.

"Banks are continuously improving their offerings and improving the dealer lending experience. This is putting competitive pressure on all automotive lenders to focus on providing outstanding service to dealers in order to maintain or grow their share of the business," Li continued.

The firm also delved into loyalty drivers among dealers when it comes to financing.

Specifically in the crop of dealers utilizing non-captive lenders, when satisfaction scores are 800 or higher, the likelihood of a dealer planning to stay loyal to the lender is substantially stronger than a situation where satisfaction is at 500 or lower.

In fact, 61 percent of highly satisfied dealers (those rating their lender with 800-plus scores) claim they will without a doubt send more of their business to that particular lender, according to J.D. Power. Only 7 percent of dealers who gave their lender 500-or-less scores said the same.

"There is a similar pattern among dealers working with captive finance providers," the firm stressed, pointing out that 63 percent of highly satisfied dealers "definitely" plan on pushing a bigger slice of their business to that lender, with only 10 percent of dealers in the 500-and-lower satisfaction range saying the same.

J.D. Power went on to emphasize the importance of getting the application for a loan or lease processed in a timely manner.

"For dealers, speed in processing a loan or lease application is crucial.  Dealers find banks more frequently are able to provide funding in 24 hours or less than are captive providers — 84 percent versus 56 percent, respectively," officials emphasized.

Cuevas added: "Evaluating credit decisions with a high degree of predictability leads to higher dealer satisfaction. In addition, lenders that provide dealers access to the same credit buyer at least 80 percent of the time increase satisfaction by nearly 20 index points compared to those who have more variable interaction."