Dealers like e-contracting.
That’s one of the key findings from the 2015 U.S. Dealer Financing Satisfaction Study by J.D. Power released this week. Another takeaway: Dealers are willing to pay lenders a premium for good service.
When dealers use lender-provided e-contracting, their overall satisfaction averages 913 on a 1,000-point scale, compared with 856 when lenders don’t provide e-contracting, J.D. Power said Monday when results of the study were released.
More than half of dealers indicated that faster funding is the main benefit of e-contracting. Dealers’ business with a finance provider rises 39 percent on average as a result of the service.
“The decision maker is now the dealer principal,” Michael Buckingham, senior director of the auto finance practice at JD Power, told Automotive News. “Using someone with e-contracting is huge on their cash flow.”
Among lenders, automakers’ captive finance companies appear especially eager to provide e-contracting.
Industrywide, just more than a quarter of auto lenders support e-contracting, while nearly half of the captives have latched on to the service, the study results show.
“Captives have really picked up the pace with e-contracting,” Buckingham said. “The dealers tell us that management is requesting the [finance managers] to e-contract to speed up the cash flow.”
Mercedes’ captive leads
The study measured dealer satisfaction with lenders on a 1,000-point scale in four areas: prime retail credit, nonprime retail credit, retail leasing and floorplanning.
Dealer satisfaction in the prime retail credit segment is 868; in the nonprime retail credit segment, 828; in the retail leasing segment, 894; and in the floorplanning segment, 943. (See related story, “Mercedes-Benz Financial leads in dealer satisfaction, J.D. Power finds)
Of the 36 auto lenders ranked in the study, Mercedes-Benz Financial Services led in prime retail credit, with a score of 971; in retail leasing, with 978; and in floorplanning, with 986. J.D. Power was unable to provide a ranking among nonprime retail credit lenders because of the small number of players in that segment, a spokesman said
Four of the top 10-ranked lenders in prime retail credit were the captive finance arms of luxury brands. Of the 36 lenders, 19 scored above the industry average of 868 in the segment.
Luxury-brand captives have led the ranking “for years,” Buckingham said. “Captives in general have really robust and rich product offerings.”
Luxury-brand captives tend to also support more affluent customers, who are typically easier to underwrite, he added.
The study was drawn from nearly 21,800 finance provider evaluations, provided by nearly 4,000 new-vehicle dealerships in the U.S. during March and April.
For the prime retail credit and leasing segments, the study measured satisfaction based on finance provider offerings, application and approval process and sales representative relationship. The retail leasing segment also measured satisfaction based on vehicle return process.
Of the dealers surveyed, nearly two-thirds were willing to pay an additional 0.50-0.60 basis points on their loan terms to receive good service from their lenders in the prime retail credit segment.
If lenders are “providing great service and overall experience, dealers are not just focused on best price wins,” Buckingham said.
Dealers are willing to pay more for better service from their lenders because it helps with throughput, customer experience, cash flow and underwriting, he added.
Choosing a lender has become more about partnership than price, Buckingham said.
A dealer-focused relationship pays off for the lender. Sixty-eight percent of dealers who had positive experiences said they “definitely will” increase the percentage of business they conduct with their providers.
In general, captives perform better because of their sales representatives’ relationships with the dealers, Buckingham said.
“The ratio of dealers to sales reps is lower in the captives,” he said. “The sales reps are more accessible and communicate more frequently than noncaptives.”