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Captive providers outperform banks in dealer finance satisfaction in China

SHANGHAI – Captive providers in China outperform banks in overall dealer finance satisfaction, according to the J.D. Power Asia Pacific 2014 China Dealer Financing Satisfaction (DFS) StudySM released on September 17.

The inaugural study examines dealer satisfaction with finance providers in two segments, retail credit and floor planning, based on three factors in each.

In the retail credit segment, dealer satisfaction with captives is 39 points higher (on a 1,000-point scale) than with banks. In the floor planning segment, dealer satisfaction with captives is 23 points higher. However this relationship varies by size of city, region of the country and domestic vs. international brands.

“The study clearly shows that dealer satisfaction is positively correlated to sales volume and dealer loyalty,” said Joseph Yang, senior manager of auto finance at J.D. Power China.  “This proves the fundamental rule that it is much easier to increase sales and retain customers when the customers are satisfied.”

“When it comes to retail credit, there is still a wide gap between China and other developed countries in dealer finance penetration rates for both new vehicles and used cars, which indicates there’s plenty of room for improvement,” said Yang. “For floor planning services, both captives and banks should develop strategies to improve their offerings and provide dealers with products that better meet their needs.”

Key findings of the study include:

  • The penetration rate of dealer finance in China has continuously increased during the past 6 years. In the luxury market, new-vehicle purchases with a loan have increased to 31 percent in 2014 from 8 percent in 2008.  The market potential for dealer finance providers is still promising based on the anticipated increase in passenger-vehicle sales in China.
  • The study shows high dealer satisfaction (satisfaction scores of 833 or higher in retail credit and 855 or higher in floor planning) can drive dealer sales volume. When satisfaction is high, dealer sales volume increases by 26 percent in the retail credit segment and by 20 percent in the floor planning segment.
  • There is a strong correlation between dealer satisfaction and loyalty. Among dealers using finance providers that have high satisfaction (satisfaction scores of 833 or higher) in retail credit segment, 84 percent say they “definitely would” continue using their current lender during the next 12 months. Loyalty among dealers using providers with medium (799–829) or low (797 or lower) satisfaction drops to 69 percent and 51 percent, respectively.
  • Program training and clarification is the service most expected by dealers and also the service most often provided by sales representatives. Dealership-performance consulting is the second most expected service; however, sales representatives struggle to meet dealer expectations in this area.
  • Dealers expect same-day service for floor planning funds to be released after the application is submitted. However, only 23 percent of finance providers meet this expectation. When funds are released the same day, satisfaction is 871. When dealers have to wait one to three days for funds, satisfaction declines to 836.

The 2014 China Dealer Financing Satisfaction (DFS) Study is based on responses from 2,145 dealers, representing 47 vehicle brands across 73 cities throughout China, who were surveyed between January 2014 and March 2014.


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