Dealer and Lender Relationship Key in Determining Who Approves Your Car Loan

When you’re sitting in the finance manager’s office at the dealership waiting to see who will ultimately approve your auto loan application, the decision likely has little to do with you. The J.D. Power and Associates 2010 U.S. Dealer Financing Satisfaction Study shows that the auto lenders who are the best at making dealers happy get the most car loan applications sent to them.

What makes dealerships happy? Dealers like the lenders who are the best at establishing proactive and ongoing lines of communication, improving speed and flexibility of approval and funding process and providing satisfying interactions with dealers, according to the study.

The study found that within prime auto loans (high credit scores), lenders with a highly satisfied dealer network receive more car loan applications to review. Also, lenders with highly satisfied dealers also close a greater percentage of the auto loans they approve. J.D. Power says that as a result, lenders delivering higher satisfaction to dealers are spending less money on processing new car loans and also are enjoying higher risk-adjusted returns.

Toyota Avalon

Toyota Financial Services ranked fifth in dealer satisfaction for prime auto loans.

Since the finance manager’s job is to get customers approved for auto loans and leases so the dealership can sell more vehicles, a happy finance manager will send more future business to the lenders who give the dealership the best experience. Lenders who make dealerships happy will ultimately make more money from more auto loans and leases.

Sixty percent of highly satisfied dealers say they "definitely will" increase the percentage of business sent to the lender, while just 12 percent of dealers with low satisfaction say the same.

The study also found that banks are building a better relationship with dealers compared to the dealers’ captive finance companies, which J.D. Power says is due to economic challenges facing captive lenders and the willingness of banks to meet critical dealer financing needs.

"Banks have helped to fill the void in the retail and floor plan markets created by the captive lending uncertainty and turmoil in the securitization market," said Paul A. Cuevas, director of automotive finance at J.D. Power and Associates.

The top five auto lenders with the highest scores of dealer satisfaction in the prime auto loan category are (in order) Alphera Financial Services, BMW Financial Services, Mercedes-Benz Financial, Audi Financial Services and Toyota Financial Services.

The top five lenders for consumer leasing with the highest dealer satisfaction scores are (in order) BMW Financial Services, Mercedes-Benz Financial, Audi Financial Services, Ford Credit and Toyota Financial Services.

So if you’re shopping for a car and are waiting to hear back from the finance manager to see if you’ve been approved for the auto loan or lease, your application was most likely sent to the lenders who have the best relationships with the dealer, not necessarily the ones with the best auto loan rates.