2 elements that help dealers in non-prime financing | Subprime – Auto Remarketing

“There are so many more multiple franchises managed by general managers and principals,” he continued. “As these dealers are getting bigger, they’re sitting back and saying, ‘Cash flow is king for us. Let’s not hold out for a little bit of rate or a little bit lower lender fee or things like that.’ They’re looking at cash flow.”

Buckingham noted that study results showed the application process also can be improved when stipulations for funding are clearly known by store finance managers.

“It is really critical for the lender through their sales team to help the dealer understand exactly what their parameters are,” he said. “We see that really resonate where the lender has got to do a great job of making sure of what they’re looking for and what’s in the buy box is clearly articulated out there.

“We see a huge sway when that’s not being done. You can think about it and it’s just causing a lot of frustration and to a degree time wasters,” Buckingham added.

The other element that helped finance companies that cater to the non-prime space to score higher in JD Power’s study was improvements in the verification. For example, Buckingham mentioned that finance companies that have alliances with credit bureaus to validate residency or income made dealers more satisfied.

“They’re looking to see a lender that’s easy to work with. If they’re seeing a lender eliminate some of the stips, there’s definitely higher satisfaction,” Buckingham said.

Overall study results

In the highly competitive auto financing environment, JD Power determined the level of service provided, including technology and a collaborative and consultative staff, is more important than price, as dealers are willing to pay a premium for high-quality service.

The US Dealer Financing Satisfaction Study measures dealer satisfaction with finance providers in four segments: prime retail credit; non-prime retail credit; retail leasing; and floor planning. Satisfaction is calculated on a 1,000-point scale.

Dealer satisfaction in the prime retail credit segment came in with an average score of 868. In the non-prime retail credit segment, satisfaction settled at 828.

Dealer satisfaction in the retail leasing segment stood at 894, while in the floor planning segment, satisfaction topped out at 943.

While dealerships continue to seek ways to improve their margins, Buckingham reiterated that they also seek providers to speed customer throughput in the sale or lease of their vehicles and in many instances are willing to pay a premium for a higher-quality financing experience. He noted 63 percent of dealers are willing to pay an additional 0.50-0.60 basis points on their loan terms (down 4 percentage points from 2014) to receive good service from their lenders in the prime retail credit segment.

JD Power acknowledged that the industry works hard to establish high-value, one-on-one relationships with customers when it comes to the sales and service processes. The same principle applies to dealers when it comes to the relationship with their finance companies in all consumer-facing products — prime retail credit, non-prime retail credit and retail leasing.

“Auto lending continues to be a relationship business. Findings of the study show that assigning/aligning dedicated underwriters positively impacts dealer satisfaction by providing higher levels of service and collaboration,” JD Power said.

As Buckingham pointed out, the study showed a dealer-focused sales rep relationship has a positive effect on satisfaction and retail contract volume.

When a high level of sales rep service is provided, satisfaction is substantially higher than when there is no focused support (935 versus 754, respectively). Among dealers with a focused relationship in which all sales rep relationship key performance indicators (KPIs) are met, 68 percent said they “definitely will” increase the percentage of business they conduct with their provider.

“Speed of funding has become a critical differentiator in the eyes of the dealer as efficient cash flow is demanded by dealer management, not absolute finance and insurance income,” Buckingham said.

“Fast application processing allowing dealers to speed the customer delivery process is also critical. Auto dealers are willing to pay a price premium for these services,” he went on to say.

Buckingham added dealers don’t want loan processors, instead, stores want collaborative consultants who can support them every step of the way.

“High-performing lenders provide a range of services that resonates with dealers, which include helping them understand the variety of lending options available and how they can maximize profits, reduce expenses and retain customers,” JD Power said.

Other key findings

JD Power mentioned six other notable points stemming from this year’s study, including

— A majority (84 percent) of dealers indicate their lender provides a dedicated underwriter person and or team who contacts them frequently, providing valued-added communications.

— Overall satisfaction is highest when sales reps engage in discussions about customer retention (922), dealership performance consulting (916) and training and clarification of programs (916), compared with when they do not (831, 818 and 816, respectively).

— In the floor planning segment, 85 percent of dealers are assigned a primary support representative or team who can quickly respond to their needs and questions. Additionally, 75 percent of dealers indicate being able to immediately reach their support staff. When this occurs, satisfaction is 975. When dealers have to wait one hour to reach their support staff, satisfaction declines significantly to 938.

— eContracting, or finance company-provided technology that enables same-day contract funding, improves dealer satisfaction. When dealers use eContracting or a proprietary technology provided by their lender, overall satisfaction averages 913, compared with 856 when lenders do not use this service. Additionally, 56 percent of dealers indicate that faster funding time is the main reason to use eContracting. On average, there is a 39 percent increase in dealers’ business with their finance provider due to eContracting.

— The study found that dealerships retain 59 percent of their leasing customers through retention programs and consumer guidance provided by their lender.

— A total 75 percent of dealers indicate increasing retail business with their provider because of their floor planning relationship.

Dealer financing satisfaction rankings

Mercedes-Benz Financial Services ranked highest among finance companies in the prime retail credit segment with a score of 971. Following in the rankings were Mini Financial Services (962) and Alphera Financial Services (961).

Mercedes-Benz Financial Services also took the highest mark among finance companies in the retail leasing segment with a score of 978. Following in the rankings were BMW Financial Services (961) and Lincoln Automotive Financial Services (956).

Furthermore, Mercedes-Benz Financial Services ranked highest among floor planning providers for a fifth consecutive year with a score of 986. Following in the rankings were BMW Financial Services (974) and Ford Credit (961).

Satisfaction is measured across three factors in the prime and non-prime retail credit segments, including:

— Finance provider offerings
— Application and approval process
— Sales representative relationship.

Four factors are measured in the retail leasing segment, including:

— Finance provider offerings
— Application and approval process
— Sales representative relationship
— Vehicle return process.

Four factors are measured in the floor planning segment, including

— Finance provider credit line
— Floor plan support
— Sales representative relationship
— Floor plan portfolio management.

The study captures nearly 21,798 finance provider evaluations across the four segments. These evaluations were provided by roughly 3,934 franchised dealerships in the United States.

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