J.D. Power Ranks Lenders by Dealer Satisfaction in Various Categories
WESTLAKE VILLAGE, Calif. — What is the best way to drive lender success in these troubled times? According to J.D. Power and Associates it boils down to just one thing — dealer relationship.
Releasing its J.D. Power and Associates 2008 Dealer Financing Satisfaction Study this morning, which for the first time analyzed subprime dealer satisfaction, officials stressed that developing the dealer-lender relationship is particularly important given the current economic struggles and market turmoil.
For instance, within the floor planning segment, 44 percent of dealers report that the relationship with a lender is their primary reason for selecting a provider.
Similarly, the dealer-lender relationship is cited most often as the primary reason for choosing a finance provider in the subprime retail credit segment.
"In today's tough times, automotive lending priorities may be focused on the issues of liquidity and risk rather than dealer satisfaction, but lenders cannot afford to miss the growth opportunity tied to dealer satisfaction," explained Rich Howse, senior director of the automotive finance practice for J.D. Power.
"Dealers recognize those lenders that make the effort to partner with them for the long haul, so building and maintaining strong relationships with dealers will be the foundation of future revenue growth as the industry rebounds," he highlighted.
Going hand in hand with relationship, auto finance providers that achieve high levels of satisfaction among dealers also tend to receive a larger share of business from those dealerships.
Some aspects of financing service that are particularly important to maximizing dealer satisfaction are the ability to interact with a single credit buyer, short application approval times and expedient funding, the company indicated.
Within the prime retail credit segment, dealers who are "delighted" with their lender provide the lender with 53 percent of the loan originations generated at the dealership on average, while dealers who report being merely "satisfied" provide lenders with 40 percent.
In contrast, however, dealers who are "dissatisfied" with their lender give the company only 26 percent of their business, on average
"Dealer satisfaction with automotive lenders clearly impacts the volume of retail business a lender receives," noted Howse.
"With more than 20,000 dealerships in the U.S., the potential revenue linked to increasing satisfaction can translate to billions of dollars. For instance, in the prime retail credit segment, the difference between just one dealer who indicates they are ‘delighted' and one who indicates they are ‘dissatisfied' can mean an average of more than $3 million in additional loan originations in one year," he pointed out.
Breaking it down, the J.D Power study investigated dealer satisfaction with finance providers in four segments: prime retail credit; retail leasing; subprime retail credit; and floor planning.
It examined five key factors that contribute to satisfaction within the prime retail credit, retail leasing and subprime retail credit segments, including provider offering, credit personnel, application/approval process, termination policy/service and sales representative relationship.
Furthermore, four factors were measured in the floor-planning segment, including provider offering, floor plan support personnel, inventory process and process/service.
After all these categories were tallied, J.D. Power found that one lender swept them all — BMW Financial Services.
"We're proud of our consistently high rankings on this important study. We have more top awards for dealer satisfaction than any other individual financial services company since this study was introduced 14 years ago, explained Edward Robinson, president and chief executive officer for BMW Financial Services, Americas region.
"But to capture four top rankings in one year is phenomenal and a demonstration to our dedication to serving our dealer customers," he continued. "This is the fifth consecutive year that we are at the top of the retail lease category.
He went on to say that, "In a difficult business environment, when many lenders have abandoned all or segments of the automotive finance business, we remain committed to providing a full complement of financial services to our dealer customers.
"Our dealers acknowledge the importance we place on their business and our role in supporting them. We appreciate their support with the feedback provided in all the measurements that comprise this comprehensive study," he added.
According to J.D. Power the rankings came in as follows:
Prime Retail Credit
BMW Financial Services took the highest ranking in prime retail credit satisfaction with an index score of 946 on a 1,000-point scale, performing particularly well in four factors driving dealer satisfaction, credit personnel, application/approval process, termination policy/service and sales representative relationship.
Alphera Financial Services (a BMW Financial related provider) at 940 and Volkswagen Credit at 938 followed BMW Financial Services in the rankings.
With a score of 942, BMW Financial Services also ranked highest in retail leasing satisfaction for a fifth consecutive year, performing particularly well in credit personnel, termination policy/service and application/approval process.
Volkswagen Credit at 934 and Mercedes-Benz Financial at 924 follow in the segment.
Subprime Retail Credit
In the subprime retail credit segment, which is new to the 2008 study, interestingly enough, BMW Financial Services took home the highest rank, with a score of 966, performing well across all factors driving satisfaction.
Volkswagen Credit followed with 943, and GMAC ranked third in the segment with 922.
Continuing its sweep, BMW Financial Services ranked highest in floor planning with a score of 963, performing well in all four of the factors that drive satisfaction.
Volkswagen Credit followed closely in the rankings at 960 and Audi Financial Services ranked third in the segment with 940.
The 2008 Dealer Financing Satisfaction Study was based on responses from 4,770 dealer principals who were surveyed March through July 2008.