High Dealer Satisfaction Means Good Business for Automotive Lenders

by James Houston
High Dealer Satisfaction Means Good Business for Automotive Lenders

As automobile dealers increasingly expect faster and more efficient vehicle financing, they have begun to pivot away from placing the highest value on transaction speed and focus instead on their relationship with their lenders. This change in expectations is causing lenders to ask how they can increase their business. To answer this, credit unions and other lenders must consider some current dealer-related trends.

One is a shift in new-vehicle sales, combined with greater competition and shrinking margins, which has driven dealers to re-evaluate the relationships they have with credit unions and other lenders. While the all-time new-vehicle record sales year in 2016 accounted for 14.02 million retail sales, according to the Power Information Network® (PIN) from J.D. Power, these sales represented a decrease of 1.6% from 2015. The forecast for 2017 and 2018 isn’t much better, with flat or only marginally higher sales expected. Although technology remains an important part of the lender-dealer equation, it no longer is a primary reason dealers choose a lender.

What exactly is motivating dealers to select a lender today? According to results of the J.D. Power 2016 U.S. Dealer Financing Satisfaction Study,SM overall dealer satisfaction and likelihood of increasing business with specific lenders were highest when lenders established close, collaborative relationships with dealers.

Dealers with high levels of satisfaction are significantly more likely to say they “definitely will” increase the amount of business they send to a lender during the next year, compared to the percentage of dealers with low levels of satisfaction who say the same.

With these trends in mind, how do credit unions and other lenders achieve a high level of satisfaction? The answer includes addressing the key performance indicators (KPIs) identified in the Prime Retail Credit segment of the study that have to do with lender-dealer touch points. Some of these are discussed below.

Importantly, dealers expect credit unions and lenders to pay them a visit. Building strong lender-dealer  relationships requires regular sales representative visits and interactions throughout the year. The study defines dealer expectations of regular visits as at least one phone call and one visit each month. As 51% of dealers surveyed for the study reported that they have not been visited regularly, there is much room for improvement by lenders in this area.

Lender-dealer interactions need to serve a purpose, and those additional interactions that are successful are generally forged by sales representatives who are problem solvers. In fact, even though it’s No. 5 on the list of what dealers desire from their sales representatives, dealership performance consulting leads to the highest levels of overall satisfaction.

Sales representatives are often the only in-person connection a dealer has with a lender and are instrumental in determining the dealer’s business relationship with a lender. Lenders must invest in their sales representatives, as 51% of dealers report that they “definitely will” increase the amount of business with the lender when visited by a qualified, well-trained sales representative.

There is a lot of room for growth and improvement in achieving higher satisfaction, as only 17% of dealers indicated that their lender delivered on all of the relationship management-related KPIs noted above. Additionally, the “people helping people” motto stitched in the fabric of credit unions should prove to be a competitive edge in this new lending environment. Credit unions that focus on helping dealers close transactions and are willing to personalize the lender-dealer relationship will win.

I’ll be speaking more about this topic in a session titled, “Dealer Financing Satisfaction Study – Fundamental and Changing Tides of Meeting Dealer Needs” at CU Direct’s Lending Conference, DRIVE ’17, in Las Vegas on Wednesday, May 24 from 2:00 p.m. to 3:00 p.m.


About the Author

James Houston
James Houston is Senior Director, Automotive Finance Practice at J.D. Power. He is responsible for leading and directing the practice in providing the auto finance industry with Voice of the Customer data and insights into the current market and future trends. Mr. Houston joined J.D. Power in 2016, bringing with him nearly 30 years of experience in the auto finance business, most recently at TD Auto Finance.