WESTLAKE VILLAGE, Calif. — J.D. Power and Associates discovered dealer satisfaction with automotive financing lenders has increased notably this year with improvement by certain banks outpacing gains by captive lenders, particularly in the prime retail credit space.

Assertions in J.D. Power's 2011 U.S. Dealer Financing Satisfaction Study released Thursday also showed dealer satisfaction with lenders has increased from 2010 in the prime retail credit, retail leasing and floor planning areas. Analysts discovered satisfaction improved in each of these areas (on a 1,000-point scale) by 15 points, 13 points and 35 points, respectively.

However, analysts acknowledged they didn't give any scores in the subprime retail credit segment due to insufficient market representation.

But, J.D. Power said that while captive finance providers are the highest performers in each area, year-over-year improvement by non-captive lenders has outpaced improvement by captives.

Particularly within the prime retail credit segment, several banks — including Ally Financial, Bank of America, Citizens Auto Finance and SunTrust Bank — have improved at a considerably higher rate than the industry average, according to analysts.

J.D. Power indicated dealerships cite several reasons for their high satisfaction with these non-captive lenders, including ease of conducting business, quick decisions and flexibility of programs and purchasing.

"The ongoing recovery of the automotive industry will continue to bring shifts in the lenders operating in this space, intensifying competition as lenders vie for new business," explained Paul Cuevas, director of automotive finance at J.D. Power.

"Lenders that provide a satisfying experience for dealers — whether captive or non-captive — are likely to benefit from a greater share of dealer business," Cuevas continued.

J.D. Power contended that continuation of historically low interest rates caused a shift in the importance of various aspects of the dealer experience. The firm thinks the importance of price decreased and, offsetting that, the people and processes dealers encounter during their lender dealings became more influential in satisfaction with the lending experience.

According to Cuevas, providing a highly satisfying experience to dealers benefits lenders not only in terms of gaining greater volumes of dealer business, but also in commanding premium pricing.

J.D. Power's study revealed that 56 percent of dealers say they would pay a higher buy rate to send business to a lender that provides them with a more satisfying experience.

In addition, the analysis showed approximately 21 percent of dealers say they would pay as much as 100 basis points more to work with a lender that provides a satisfying experience.

"Conventional wisdom says that a ‘show me the money' attitude among dealers causes them to focus primarily on the best rate when selecting a lender," Cuevas stated.

"However, our study clearly shows that lenders can get more loan volume and better pricing by differentiating themselves through more seamless processes and better relationships with their dealers," he went on to say.

"As a result, better-performing lenders have the opportunity to enjoy higher levels of revenue growth and profitability as the health of the market continues to improve," Cuevas added.

So which lenders fared best in the study? J.D. Power broke down its report into three categories, but officials reiterated no honors were presented in the subprime retail credit segment due to insufficient market representation.

Prime Retail Credit

BMW Financial Services and Mercedes-Benz Financial Services each rank highest in the prime retail credit segment, in a tie (959 each).

J.D. Power noted BMW Financial Services performs particularly well in the application/approval process factor, while Mercedes-Benz Financial Services performs particularly well in the provider offering factor.

Following in the rankings was Ford Credit (920). J.D. Power mentioned Ally Financial improved more than any other lender in the segment in 2011, increasing by 113 points from 2010.

The complete rankings included:

—BMW Financial Services: 959
—Mercedes-Benz Financial Services: 959
—Ford Credit: 920
—Alphera Financial Services: 918
—Honda Financial Services: 892
—Toyota Financial Services: 884
—Ally Financial: 883
—SunTrust Bank: 877
—Citizens Auto Finance: 871
—Huntington National Bank: 871
—Bank of America: 864
—Industry Average: 862
—Wells Fargo Dealer Services: 858
—Hyundai Motor Finance: 853
—Volkswagen Credit: 853
—Branch Banking & Trust (BB&T): 849
—US Bank: 846
—Harris Bank: 845
—Nissan Motor Acceptance: 841
—Fifth Third Bank: 839
—Chase Auto Finance: 837
—TD Banknorth: 836
—Capital One Auto Finance: 810
—Credit Union Direct Lending: 790
—AmeriCredit: 734

Retail Leasing

J.D. Power discovered Mercedes-Benz Financial Services ranked highest in the retail leasing segment with a score of 960 and performed particularly well in the sales representative relationship factor.

The study showed BMW Financial Services followed closely in the rankings with a score of 957.

Ford Credit ranked third with a score of 914.

Ally Financial improved more than any other lender in the retail leasing segment in 2011, increasing by 104 points from 2010.

The complete rankings included:

—Mercedes-Benz Financial Services: 960
—BMW Financial Services: 957
—Ford Credit: 950
—Honda Financial Services: 896
—Toyota Financial Services: 882
—Ally Financial: 877
—Industry Average: 877
—Volkswagen Credit: 868
—Hyundai Motor Finance: 845
—Nissan Motor Acceptance: 826
—Chase Auto Finance: 793
—AmeriCredit: 791
—Kia Motors Finance: 791
—US Bank: 784

Floor Planning

J.D. Power indicated Mercedes-Benz Financial Services ranked highest in the floor planning segment with a score of 970, followed by BMW Financial Services (966) and Toyota Financial Services (943).

The industry average came in at 903, with Ford Credit rising above it (921) and Ally Financial falling below it (890).

Company Reaction

Both Mercedes-Benz Financial Services and

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BMW
Group Financial Services shared comments about the high marks they received in the J.D. Power study.

"Everybody in our organization shares in this customer service success," stated Dietmar Exler, vice president and head of Mercedes-Benz Financial Services.

"All of our people who call on our dealers as well as collections, customer service, dealer credit, information technology and numerous other departments need to be commended for the great teamwork," Exler added.


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Meanwhile, Ed Robinson, president and chief executive officer
for BMW Group Financial Services, declared "We are proud to consistently find
recognition within this coveted award program.

"As a captive finance group, our goal is always to exceed
the expectations of our dealers and continued acknowledgement by J.D. Power
only enhances our credibility with our dealers, as well as customers. We are
extremely proud of our Associates who also service Canada and Mexico from our
Regional Services Center in Hilliard, Ohio and earn this recognition with their
daily commitment," Robinson continued.

Robinson also noted that despite industry turmoil during the
past several years, dealer satisfaction continues to grow.

"We are making great strides through the use of innovation
and mobile technology that delivers world-class service for our dealers, and
thus, our mutual clientele," he went on to say.

Ways to Improve Satisfaction & Study Background

J.D. Power emphasized there are specific key areas where lenders can take action to raise dealer satisfaction: streamlining the approval and funding process, providing consistent contacts and messaging and communicating with dealers through their preferred channels.

Analysts elaborated on each of those points.

—Lenders should streamline the approval and funding process to be as efficient as possible, while still allowing ample time to efficiently manage risk. Establish clear thresholds for customers with favorable credit profiles, which could qualify for more automatic approvals.

—Ensure dealers are able to interact with the same credit buyer as frequently as possible, particularly when putting together complex deals. When the usual credit buyer is unavailable, ensure that others on the credit team provide consistent messages.

—Communicate program offering and rate sheet changes to dealers through preferred channels, which for many dealers are the Web, email, phone and visits by sales representatives. Consistently using multiple communication channels increases the likelihood that dealers will receive important information.

J.D. Power reiterated that its U.S. Dealer Financing Satisfaction Study examines dealer satisfaction with finance lenders in four segments: prime retail credit, subprime retail credit, retail leasing and floor planning.

The study also reviews 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 used in the floor planning segment: finance provider credit line, floor plan support and floor plan portfolio management.

The 2011 U.S. Dealer Financing Satisfaction Study was based on responses from 2,763 dealer principals who were surveyed between March and April.