J.D. Power: Perception of lender matters in auto finance

With nearly half of consumers researching auto financing online prior to visiting a dealership, consumers' views on individual lenders matter, a J.D. Power expert said following the release of the company's 2022 U.S. Consumer Financing Satisfaction Study.

"That's a great opportunity to capture that customer," Patrick Roosenberg, director of automotive finance intelligence at J.D. Power, said of consumers' preliminary research behavior. "Why would you not want to try to lock them up?"

Borrowers who called themselves extremely likely to recommend their current auto lender were nearly twice as prone to say they would "definitely" consider that funding source again for their next vehicle, J.D. Power said in a news release Nov. 14 announcing the study findings. The July-August survey polled slightly more than 10,000 customers who had taken out a car loan or lease within the past three years.

Captive finance companies might have more success on this front. That segment of the market once again "significantly" made a better impression on consumers than other lenders, according to J.D. Power. The average captive received a net promoter score of 56, while noncaptives only averaged a 40.

A customer who sets up financing in advance, such as with a preapproval, is unlikely to drop that lender for one offered by the dealership, based on the J.D. Power survey.

"We don't see a real high flip rate," Roosenberg told Automotive News on Nov. 18.

But Roosenberg called it important for lenders to work with dealerships. "You don't want to upset the dealers," he said.

Instead, a lender should, if possible, identify the customer's dealership and alert the retailer after a customer visits the lender's site: "Hey, we just preapproved this customer."

Roosenberg told Automotive News that 47 percent of luxury vehicle borrowers researched auto finance before visiting the dealership, as did 46 percent of mass market consumers. Last year, J.D. Power found 45 percent of all customers researched financing first.

Most of the customers who explore auto finance in advance start their research more than 30 days before buying or leasing a vehicle, according to the new J.D. Power consumer financing study, a similar finding as the 2021 version of the study.

Luxury customers were happiest with Capital One Auto Finance, which saw a satisfaction score of 879 out of 1,000 and ranked No. 1. It was followed by GM Financial with an 865 and BMW Financial Services with an 858.

Ford Credit scored 877 and ranked No. 1 among mass-market finance companies, its second consecutive year in the top spot. Southeast Toyota Finance placed second with an 874, and Honda Financial Services and Capital One both received an 870 to tie for third.

Roosenberg said the mass-market industry average of 849 hadn't changed significantly, but the luxury segment had notably tumbled to 848. Luxury lenders received an 858 last year.

Roosenberg attributed this luxury segment drop to significant declines among certain individual lenders.

Important customer satisfaction variables included consumer knowledge of a lender's features, such as the ability to pay on an app or website and the ease of doing business with the lender.

"It's about awareness that a service exists, and it's about ease of use," Roosenberg said.

He said borrowers would compare their experience with an auto lender to their experience on another financial transaction, such as what they encounter with their mortgage.