J.D. Power Study: Relationships Fostered Under Preferred Programs Significantly Increase Dealer Satisfaction
August 01, 2012
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WESTLAKE VILLAGE, Calif. — While a luxury European brand's
captive finance company took several honors, the J.D. Power and Associates 2012
U.S. Dealer Financing Satisfaction Study determined satisfaction with auto
finance providers is significantly higher among dealers who have a preferred
relationship with their lender.
What's driving this trend? J.D. Power said it's the higher number of automated approvals, faster funding, more interactions with their sales representative and a perceived increase in the flexibility of the lender's buying policy.
Analysts explained preferred relationships are instituted by lenders that want to capture a larger percentage and/or a certain mix of a dealership's business and are often targeted to the lender's best dealerships. They noted preferred dealers who complete a certain volume or mix of their business with their lender are often rewarded under the terms of preferred relationships with rate discounts, better access to special programs and an improved service experience, compared with traditional relationships.
Among preferred dealers, J.D. Power found overall satisfaction with their prime retail credit lender is 919 (on a 1,000-point scale), compared with 845 among dealers without a preferred arrangement.
The firm's survey noted the largest gaps in satisfaction scores between preferred and traditional relationships are in the usefulness of dealership visits (9.3 vs. 8.1, on a 10-point scale, respectively), and flexibility of the buying policy attributes (9.1 vs. 7.9, respectively).
"The usefulness of dealership visits and the flexibility of the buying policy are among the most important attributes of the overall relationship, so the gap in scores is extremely significant," said Lisa Chubliski, client services director of auto finance at J.D. Power.
Nearly two-thirds of dealers in a preferred relationship — 63 percent to be exact — indicate they receive funding in less than 24 hours versus 46 percent of dealers in a traditional relationship.
The report showed there is an even larger difference in the frequency of sales representative visits, with 58 percent of dealers in a preferred relationship receiving sales representative visits 12 times per year versus 33 percent of dealers in a traditional relationship.
"While not new to the industry, preferred relationships are increasing and are becoming an intriguing alternative to traditional relationships for both parties involved," Chlubiski said.
"Once the preferred relationship is established, dealerships are finding it easier to complete deals, service their customers quickly and optimize the relationship with their lender," she added.
J.D. Power's study also revealed that preferred relationships are not exclusive to the captive lenders.
"While captive lenders, by nature, offer a large percentage of preferred relationships, a notable 56 percent of banks and 30 percent of independents also offer preferred relationships," Chlubiski highlighted.
"While preferred relationships may lead to more business and better service for the dealership, they are not necessarily the right fit for all relationships," she went on to say. "The fear of restrictions or the potential of damaging other relationships may push dealerships to remain in traditional relationships with lenders."
Analysts insisted preferred relationships are designed to have a considerable impact on the percentage of dealership business sent to lenders.
Among lenders that account for between 26 percent and 50 percent of a dealer's total prime business, the report pointed out 79 percent are lenders who are defined as "preferred." That percentage increases to 90 percent among lenders that account for more than 50 percent of a dealer's total prime business.
Prime Retail Credit
BMW Financial Services ranked highest among prime retail credit lenders with a score of 963. Following in the rankings are Alphera Financial Services (959) and Mercedes-Benz Financial Services (948).
BMW Financial Services took the highest spot among lessors in the retail leasing area with a score of 959. Mercedes-Benz Financial Services followed closely in the rankings with a score of 958. Ford Credit ranked third with a score of 911.
Mercedes-Benz Financial Services ranked highest among floor planning lenders with a score of 964, followed by BMW Financial Services (960) and Ford Credit (935).
BMW Reacts to Accolades
BMW Financial Services Americas Region chief executive officer Ed Robinson shared comments when J.D. Power released the study.
"This year's J.D. Power and Associates Dealer Financing Satisfaction rating is especially significant to us in a year where we extended our regional services center's scope and capabilities," Robinson stressed.
"We challenged our organization to proactively drive for this top ranking in all aspects of our business, to raise the bar on the services, programs and products that we deliver to our dealers," he continued.
"We have an extraordinary partnership with our dealers, we are proud to share this success with them, and thank them for their continued faith in our ability to deliver first class service," Robinson went on to say.
Dealer Financing Satisfaction Findings
The study examined dealer satisfaction with lenders in four finance areas: prime retail credit; subprime retail credit, retail leasing and floor planning.
Satisfaction is measured across three factors in the prime retail credit and subprime retail credit areas: finance provider offering; application/approval process; and sales representative relationship.
Four factors are measured in the retail leasing area: finance provider offering; application/approval process; sales representative relationship; and vehicle return process. Three factors are measured in the floor planning area: finance provider credit line offering; floor plan support; and floor plan portfolio management.
Dealer satisfaction with automotive lenders has increased across all areas. Overall dealer satisfaction with prime retail credit lenders averages 885, an increase of 23 index points from 2011. Retail leasing satisfaction is 891, up 14 points from 2011, and floor planning satisfaction is 913, up 10 points.
The 2012 U.S. Dealer Financing Satisfaction Study is based on responses from 3,064 dealers who were surveyed between March and April.
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