Dealers Willing to Pay More for Quality Loan Services

Auto dealers are willing to pay a premium for high-quality lending services, according to a new study.

The delivery of services using technology, collaboration and consultation are more important than a rock-bottom price to dealers, says J.D. Power’s 2015 U.S. Dealer Financing Satisfaction Study.

It measures dealer satisfaction with finance providers in prime and non-prime retail credit as well as retail leasing and commercial floor planning, which involves financing dealer stock.

Satisfaction is calculated on a 1,000-point scale. Dealer satisfaction is 868 in the prime segment, 828 in non-prime, 894 in the leasing segment and 943 in floor planning.

As dealerships continue to seek ways to improve their margins, they also look for indirect lenders to speed loan and lease processing for their customers.

Sixty-three percent of dealers say they 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 lenders in financing car purchases for prime customers.

“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,” says Michael Buckingham, J.D. Power’s senior director-auto finance practice.

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

Dealers don’t want loan processors but rather collaborative consultants who can support them, the study says. It indicates high-rated lenders provide a range of services to dealers. Those include helping them to understand available lending options, maximize profits, reduce expenses and retain customers.

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