J.D. Power and Associates Reports: Dealer Satisfaction Brings More Business to Financial Providers
BMW Financial Services Ranks Highest in Satisfying Dealers for Prime Retail Credit and Retail Leasing; Mercedes-Benz Financial Ranks Highest in Floor Planning Satisfaction
WESTLAKE VILLAGE, Calif., Aug. 10 -- Financial providers that keep automotive dealerships happy -- beyond just low interest rates and balanced risk -- stand to gain the most business in the future, according to the J.D. Power and Associates 2006 Dealer Financing Satisfaction Study(SM) released today.
Providers that offer minimal paperwork, quick application processing and terms that allow customers to afford the monthly payments for their new vehicles, as well as reasonable low interest rates and appropriate spread between high- and low-risk customers, are quick to create dealer advocates who will continue to send business their way.
"A common misconception is that the only way to satisfy dealers is to buy 'deep and cheap,' but rates and spread of risk are not the only considerations that entice dealerships to send more business your way," said David Lo, senior manager of automotive finance research at J.D. Power and Associates. "Dealerships still want low rates and risk diversity, but they also want a seamless experience with the provider's credit desk, quick funding and a strong business relationship. When this is effectively packaged, dealerships tend to reward the provider with more business."
According to the study, 42 percent of dealers who are "very satisfied" and 21 percent who are "somewhat satisfied" with a finance provider indicate that they plan to do additional prime retail credit business with that provider over the next year. Conversely, only 10 percent of dealerships that have "neutral" feelings about a financial provider plan to send additional business to that provider.
One of the ways some providers are helping to streamline the financial process is through e-contracting -- a system that automates much of the paper process of financing a vehicle. Many dealerships expect e-contracting to result in fewer rejected contracts, which can also impact customer satisfaction by eliminating returned trips to the dealership, fewer delays in processing, increased speed of cash flow through faster funding and long-term reductions in contract processing fees.
Despite the apparent upsides of e-contracting, the study finds that fewer than 10 percent of automotive dealerships are using this new technology. The main reasons the majority of dealers are not using e-contracting are that there are too few lenders currently participating, the technology is too new, there are additional costs associated with purchasing the software and hardware, and there are training requirements associated with preparing dealership personnel to use the system.
"Many dealerships are hesitant to adopt e-contracting due to the costs, which can be very high, especially for the multi-lender systems and the training associated with learning how to use the platforms," Lo said. "However, there is clearly value in e-contracting, as 75 percent of dealerships using e-contracting indicate that they plan to increase their use of the system over the next year. The challenge right now is implementation."
The study measures dealer satisfaction with finance providers in five product segments: prime retail credit, retail leasing, floor planning, sub-prime retail and account management. The sub-prime retail and account management segments do not carry official rankings because they do not meet the award criteria.
From a segment perspective, captive finance providers improve in satisfaction in both prime retail credit and leasing. In contrast, banks and independents decline in both prime retail credit and leasing satisfaction. Interestingly, banks enjoy the most dramatic improvement in sub-prime retail credit satisfaction, likely a reflection of the "full spectrum" and "near prime" type initiatives that many banks are pursuing.
BMW Financial Services ranks highest in the prime retail credit segment, leading the industry in each of the dimensions of dealer satisfaction: finance provider offering; termination policy/service; application/approval process; and credit personnel. BMW Financial Services also ranks highest in retail leasing, performing very well across all four factors of dealer satisfaction.
Mercedes-Benz Financial ranks highest in floor planning, with segment-leading ratings in each of the three floor plan satisfaction factors: finance provider offering; process and service; and floor plan support personnel.
Performing particularly well in sub-prime retail credit are Chrysler Financial, Ford Credit, GMAC and Wells Fargo Auto Finance. Mercedes-Benz Financial Services and Toyota Financial Services perform well in account management.
The 2006 Dealer Finance Satisfaction Study is based on responses from 4,670 dealer principals who were surveyed between March and May 2006.
About J.D. Power and Associates
Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm's quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.
About The McGraw-Hill Companies
Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 290 offices in 38 countries. Sales in 2005 were $6.0 billion. Additional information is available at http://www.mcgraw-hill.com/.
