Even though vehicle sales are behind where they were a year ago, captive automotive lenders are showing increases in revenue and earnings thus far in 2001.

Analysts and financial statements credit an increase in market share, higher loan balances and manufacturer-sponsored financing incentives for the gains.

“During June, for example, we did over 75,000 contracts, which is about $1.5 billion in new business and the best month in our 18-year history,” says Mike Groff, Toyota Financial Services' vice president of planning and development.

As the computation of vehicle residual values becomes more of a black art, leasing is becoming less attractive to banks and even other automakers.

Says Mr. Groff, “Our marketplace has changed a fair amount in the last year relative to the leasing side, particularly because of the challenges that everybody has faced. All we do is automobile. We spend a lot of effort and energy. We have what we think are pretty sophisticated models to make adjustments in forecasting the residual part of the business.

“We certainly have challenges like everybody else, but we feel like we're better positioned to look at leasing as a legitimate business opportunity for Toyota and still be able to provide support that the dealers need.”

Jeff Skogen, manager of dealer training and performance consulting at Ford Credit, says, “In general, Ford Credit has done well and is continuing to do well, even in a marketplace that is supposedly slowing down a little bit.”

“It's just a matter of tweaking a process or identifying something that in most cases is a very small change that can improve overall customer satisfaction.”
Jeff Skogen
Ford Credit

Ford Credit's total net financing receivables increased to $162.3 billion in the first quarter of 2001, compared to $149.9 billion during the same period a year ago.

Mr. Skogen says Ford's low-pressure, menu-style sales pitch has boosted not only sales but customer satisfaction as well.

Although slower than other institutions in offering on-line loan approvals, most captive lenders now offer this or are planning to. ToyotaFinancial.com, for example, launched last month.

Says Mr. Groff, “We tried to put in things we think customers would like to have access to. Customers can get the payoff number for their account, status of last payment. It'll be available 24/7 instead of them having to call us. We're going to be offering an on-line credit application so a customer can apply for credit and be pre-approved before they go to the dealership.”

GMAC is piloting a new credit application option, which is expected to gain more widespread use this fall.

Dealers will be able to access eOSCAR at no charge and enter a customer's credit application. There's also an integrated system. Both offer a preliminary tier or automatic approval within a minute, approval status inquiry and 24/7 availability.

GMAC also now is offering more cash rewards for dealerships with strong F&I sales. Those range from $25 per vehicle for F&I sales penetration of 16%-30% to $85 per vehicle for F&I sales penetration greater than 70%.

Toyota plans to consolidate its field sales staff so that each dealer has one representative for finance and insurance products. Toyota staff already has started training for this transition, which will begin this fall on the west coast and be complete by the end of 2002.

As a participant in Toyota's Dealer Daily communication system, many vehicle loan applications will be handled on-line, automatically.

“Things like credit applications that the dealers may fax to us will be able to be submitted electronically through Dealer Daily to us,” says Mr. Groff. “It saves time and effort for them, allows us to automate the process. In many cases we're talking about an application processing that may have taken an hour or two may now be done in minutes.”

This system is in the pilot stage and will be rolling out in the next few months.

Ford Credit is reporting success with its program of going into a dealership and assisting the store's F&I personnel to improve their performance.

“It's just a matter of tweaking a process or identifying something that in most cases is a very small change that can improve overall customer satisfaction,” says Mr. Skogen.

One example he cites is a process called “upstream financial services.” This is when the F&I manager is called to the showroom to meet a customer during the sales process.

“The financial services managers come out of their offices and meet the customers in the showroom with the sales person. They are introduced to them and then answers any questions the customer may have at that time,” Mr. Skogen explains. “You're building a rapport with the customer, so when they walk into your office it's not the first time they've ever seen you. And you're also answering questions for them when they have the questions.

“That's one of the things we know makes a difference in customer satisfaction within the financial services process.”