Survey: Canadian auto dealers value collaboration with lenders
Sellers of new cars in Canada report increased satisfaction with their finance companies, but one thing is clear: They want more from their lenders than just credit.
According to J.D. Power’s 18th annual Canadian Automotive Dealer Financing Satisfaction Study, dealers want their auto finance providers to be true business partners.
“Dealers want their lenders to be collaborative business partners that will help them focus on the things that drive profitable growth without impairing their ability to sell vehicles,” said Mike Buckingham, senior director of the automotive finance practice at J.D. Power.
From that business partnership, dealers want personalized service from their underwriting/funding and sales teams to help them manage their credit and expedite consumer applications and funds. Dealers are increasingly concerned about customer satisfaction and rely on their lender partners to aid them in speeding up the sales, financing and vehicle delivery processes.
The study measures dealer satisfaction with finance providers in four segments: prime retail credit; retail leasing; floor planning; and non-prime retail credit. Dealer satisfaction in the prime retail credit segment is 858, and in the non-prime retail credit segment, satisfaction is 825. Dealer satisfaction in the retail leasing segment is 860, while in the floor planning segment, satisfaction is 930.
For the fourth year in a row, BMW Financial Services ranked highest in the prime retail credit segment, improving 35 points to 971 — 113 points above the industry average. BMW Financial Services performed particularly well in the application/approval process, product offerings and sales representative relationship factors. Mercedes-Benz Financial Services tanked second at 922, followed by Ford Credit Canada at 918.
Other lender scores in the Prime Retail Credit segment were:
Honda Financial Services 896
Bank of Montreal 885
TD Auto Finance 858
Nissan Canada Finance 854
National Bank 842
Toyota Financial Services 835
Desjardins/Caisse Populaire 827
RBC Royal Bank 815
Kia Motors Finance 787
GM Financial 706
The study found that 60 percent of dealers say their prime retail credit (PRC) sales reps facilitate contract problem resolution. When that occurs, overall dealer satisfaction with their PRC lender increases by 97 points (on a 1,000-point scale). Similarly, nearly half of dealers say their sales reps provide dealership performance consulting and facilitate restructuring of applications, which lift PRC satisfaction by 95 and 93 points, respectively. Additionally, 69 percent of dealers indicate that they are always able to reach their credit staff when needed, which boosts PRC satisfaction by 104 points.
Dealers want problem solvers in both the sales reps and underwriters. For finance and insurance (F&I) managers, that means occasionally granting exceptions to get their customers the financing needed to make the sale. These requests don’t often occur; in fact, dealers request exceptions an average of 10 percent of the time. When those dealer requests are granted at least 50 percent of the time, it lifts satisfaction by 80 points.
When finance companies automatically approve applications, satisfaction increases by 75 points, and when lenders are able to fund error-free contracts within the same day of submission, satisfaction jumps by 72 points.
Low interest rates and extended terms have contributed to rising vehicle sales in Canada. While these factors are supporting dealership sales, each has the potential to negatively impact lenders’ margins and portfolio risks. Low interest rates and extended terms have supported the dealer sales growth, as the average amount financed (vehicle manufacturer's suggested retail price—MSRP) has increased to $37,794 CAD in 2016, up from $27,566 in 2010, according to data gathered by the Power Information Network (PIN) from J.D. Power.
Additionally, average loan terms from commercial banks has increased over the same period to 78 months from 69 months, while term lengths from captive finance companies have extended to 69 months from 59 months, according to PIN.
“Sales representatives are integral to the dealer-lender relationship,” Buckingham said. “To make that relationship strong requires that the lender’s rep make frequent contacts with the dealership, understand their business, provide insights on current programs and help the dealer resolve financing issues.”
“In a highly competitive market like Canada, time is of the essence,” he continued. “Dealers want to be able to get quick funding, as any delay can lead to a lost opportunity, with the customer walking out the door.”
The 2016 Canadian Dealer Financing Satisfaction Study captured nearly 6,400 finance provider evaluations across the four segments. These evaluations were provided by more than 1,200 new-vehicle dealerships in Canada. The study was conducted from January through March.