Category: Auto Finance|Consumer LendingChina

Customer Satisfaction with Auto Financing Key to Brand Choice and Loyalty in China, JD Power Finds

2018-07-04

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SHANGHAI: 5 July 2018 — Although auto financing is not yet a decisive reason for consumers in China to buy a vehicle, one-third tend not to choose a certain brand because the dealer staff failed to provide clear or sufficient information on finance services, according to the JD Power 2018 China Consumer Auto Financing Sales Satisfaction Study^SM (CFS).

According to the study, the top three reasons to purchase a vehicle in China include good quality, recommendations by friends or relatives and vehicle performance.

Attractive financing programs have become the key driver for brand loyalty and repurchase, with 30% of customers purchasing the same brand because of such programs. The vast majority (95%) of buyers say they intend to use auto finance again in their next vehicle purchase.

“Even though auto finance’s penetration in China is lower than that in the United States and other developed markets, it is playing an increasingly critical role in driving Chinese consumers’ vehicle purchase decisions,” said Jacob George, Vice President and General Manager at JD Power Asia Pacific. “The landscape is evolving fast. For OEMs and dealers, the improvement in auto financing services and more experience can help them differentiate in a highly competitive market. That is also becoming an essential driver of customer satisfaction and their own business performance.”

Auto financing is still an underdeveloped, but emerging, business in China. Compared with a penetration of more than 80% in the United States, the study finds that auto financing has a less than 30% penetration in China.

Among those consumers in China who used auto financing to buy a car, 38% say they would have postponed their purchase if auto financing services had not been available. Another 10% indicate they would have not purchased a vehicle at all.

When it comes to choosing a financing provider, dealership salespeople play a critical role in providing information about financing and leasing, and are cited by 19% customers as being “the most helpful” in making the final choice of an auto finance provider, according to the study.

Following are key findings of the 2018 study:

• In-person interaction still matters: Consumers love efficiency and convenience brought by digitization but continue to prefer in-person communication during the auto financing application process. Having the assistance of a sales consultant in the financing application process, for example, notably increases satisfaction, generating a score of 811 (on a 1,000-point scale), compared with 785 for mobile app; 779 for official website; and 767 for WeChat official account. However, when it comes to signing the contract, customers are more satisfied when they sign the digital contract remotely.  
• Customers want to follow along: The ability for customers to check the terms of their contract with the finance provider has the greatest impact on satisfaction. The ability to track the financing approval process greatly increases satisfaction, to 796, compared with 745 among those who don’t know the status.

The 2018 China Consumer Auto Financing Sales Satisfaction Study examines new-vehicle shoppers satisfaction with auto finance providers. This is the first year of this study, which is designed to help understand consumer experiences and their satisfaction levels during the early financing stages, such as initial in-dealership experience, contracting and onboarding service.  

The study is based on responses from 9,204 new-vehicle buyers across 71 cities throughout China and was fielded from March through April 2018.

JD Power is a global leader in consumer insights, advisory services and data and analytics. Those capabilities enable JD Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, JD Power is headquartered in Costa Mesa, California, and has offices in Shanghai, Beijing, Tokyo, Singapore and Bangkok serving the Asia Pacific region. JD Power is part of XIO Group, a global alternative investments firm headquartered in London, and led by its four founders: Athene Li, Joseph Pacini, Murphy Qiao and Carsten Geyer. For more information, please visit china.jdpower.com or stay connected with us on JD Power WeChat and Weibo.

Media Contacts
Shana Zhuang; JD Power; China; +86 21 8026 5719; [email protected]
Geno Effler; JD Power; Costa Mesa, California, USA; 001-714-621-6224; [email protected]

About JD Power and Advertising/ Promotional Rules www.jdpower.com/business/about-us/press-release-info

 

Auto Financing Becomes Growing Source of Revenue as Dealers in China Struggle for Profitability, JD Power Finds

2018-05-31

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SHANGHAI: 5 June 2018 — Dealer profits from financing continue to grow year over year as overall dealer satisfaction with auto finance providers increases, according to the JD Power 2018 China Dealer Financing Satisfaction Study.^SM

According to the study findings, sales of financing products accounted for 11% of dealership profits by the end of last fiscal year, compared with only 5% in the 2013 fiscal year. According to the dealers surveyed, the percentage of new-vehicle buyers using a captive finance company to acquire or purchase their vehicle has reached a record high of 39% this year.

“As more automotive financing companies enter the market and as customers become more comfortable with financing their vehicle purchase, dealer profits from financing should continue to grow,” said Jacob George, Vice President and General Manager at JD Power Asia Pacific. “But in the meantime, dealers in China are still struggling with profitability as their core businesses—such as new vehicles, service and spare parts sales—remain sluggish.”

Overall dealership financial performance declined in the 2017 fiscal year, with 52% of dealerships operating profitably (down from 56% in the 2016 fiscal year), and the percentage of dealers operating at a loss increased by four percentage points.

Following are additional findings of the 2018 study:

• Retail credit segment: Captive finance companies continue to lead in market share by 51% and with a satisfaction score of 856 (on a 1,000-point scale), compared with 840 for bank/credit cards and 826 for online financing. Online financing has a small but growing share the retail credit market. Dealers continue to place the most importance on their finance provider’s application/approval process, which accounts for 37% of the overall satisfaction index.
• Floor planning segment: The overall dealer satisfaction score in the floor planning segment has increased 18 points from 2017 to 869. Sales representative relationship continues to grow in importance, which is now the highest-weighted factor in the overall satisfaction index of floor planning segment. 

The China Dealer Financing Satisfaction Study examines dealer satisfaction with finance providers in two segments: retail credit and floor planning. In the retail credit segment, satisfaction is measured in three factors: application/ approval process; sales representative relationship; and finance provider offerings/ products. In the floor planning segment, satisfaction is measured in four factors: finance provider credit line; floor plan portfolio management; floor plan support; and salesperson representative relationship.

The study is based on responses from 4,024 dealers, representing 49 vehicle brands across 84 cities throughout China, who were surveyed between December 2017 and March 2018.

JD Power is a global leader in consumer insights, advisory services and data and analytics. Those capabilities enable JD Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, JD Power is headquartered in Costa Mesa, California, and has offices in Shanghai, Beijing, Tokyo, Singapore and Bangkok serving the Asia Pacific region. JD Power is part of XIO Group, a global alternative investments firm headquartered in London, and led by its four founders: Athene Li, Joseph Pacini, Murphy Qiao and Carsten Geyer. For more information, please visit china.jdpower.com or stay connected with us on JD Power WeChat and Weibo.

Media Contacts
Shana Zhuang; JD Power; China; +86 21 8026 5719; [email protected]
Geno Effler; JD Power; Costa Mesa, California, USA; 001-714-621-6224; [email protected]

About JD Power and Advertising/ Promotional Rules www.jdpower.com/business/about-us/press-release-info

 

Satisfaction and Profit Increase among China Car Dealers as Consumer Financing Rises, JD Power Finds

2017-05-25

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BEIJING: 25 May 2017—A rise in China consumers who finance the purchase of new vehicles is a key driver in the overall satisfaction increase among China car dealers with their lenders, according to the JD Power 2017 China Dealer Financing Satisfaction Study^SMreleased today.

The percentage of new vehicle buyers who finance the purchase of a vehicle is up 8%. Overall retail credit satisfaction is 848 (based on a 1,000-point scale) in this year’s study, compared with 809 in 2016.

“Compared with the United States, auto financing in China is still relatively under-developed,” said Winston Xue, general manager of financial services at JD Power China. “The percentage of new vehicles purchased with loans is up to 64% from 57% in the luxury segment and to 57% from 49% in the mass market segment. This presents an opportunity for lenders and dealers to offer products that meet the needs of a growing population of car buyers looking to finance their purchase.”

Dealer satisfaction increases significantly over last year in retail credit (+39 points) and floor planning (+34 points). In the retail credit segment, the application/approval process experiences the largest gain (+43 points) due to sufficient financing reserves and reasonableness of documentation required for credit approval. In the floor planning segment, finance provider credit line is up 38 points, which is the largest contributor to this year’s overall gain.

 “This is the second consecutive year for an increase in dealer satisfaction,” Xue said. “As more auto financing companies enter the market, consumers have more choices and dealer satisfaction continues to increase. That’s a promising ‘three-win’ prospect for consumers, dealers and lenders.”

The study finds that credit/load commissions are becoming a growing source of revenue for dealers. According to the study, dealer profits from the sales of financing products has increased to an average of 10% of their total revenue in 2016 from an average of 2% in 2011.

The following are additional findings of the study:

Retail credit:  Having competitive financial products is the top criteria for dealers selecting a retail credit lender. Captive financial companies continue to lead with an extended market share of 65%, up 7% from 2016.

Floor planning: Guaranteed credit limit continues to be the most frequently cited reason by dealers when selecting a floor planning provider. Only about one-fourth (26%) of dealers report same-day turnaround on an application submission, with 51% receiving funds in 1-3 days.

The China Dealer Financing Satisfaction Study examines dealer satisfaction with finance providers in two segments: retail credit and floor planning. In the retail credit segment, satisfaction is measured in three factors: application/approval process; sales representative relationship; and finance provider offerings/products. In the floor planning segment, satisfaction is measured in four factors: finance provider credit line; floor plan portfolio management; floor plan support; and salesperson representative relationship.

The study is based on responses from 2,377 dealers, representing 47 vehicle brands across 84 cities throughout China, who were surveyed between December 2016 and March 2017.

JD Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable JD Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, JD Power is headquartered in Costa Mesa, California, and has offices in Shanghai, Beijing, Tokyo, Singapore, Malaysia and Bangkok serving the Asia Pacific region. For more information, please visit china.jdpower.com or stay connected with us on JD Power WeChat and Weibo.

Media Relations Contacts

Roger Zhang; JD Power; China; +86 21 2208 0974; [email protected]

Geno Effler; JD Power; Costa Mesa, California, USA; 001-714-621-6224; [email protected]

About JD Power and Advertising/ Promotional Rules www.jdpower.com/about-us/press-release-info

 

High Satisfaction Scores May Boost Financing Portfolios By as Much as 6 Million RMB Per Dealer Annually, JD Power Finds

2016-05-26

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Shanghai: 25 May 2016— Improving dealer satisfaction could generate as much as 6 million RMB in additional financing per dealer annually, according to the JD Power 2016 China Dealer Financing Satisfaction (DFS) Study^SM released today.

The study, now in its third year, examines dealer satisfaction with finance providers in two segments: retail credit and floor planning. In the retail credit segment, satisfaction is measured in three factors: application/ approval process; finance provider offerings/ products; and sales representative relationship. In the floor planning segment, satisfaction is measured in four factors: finance provider credit line; floor plan portfolio management; floor plan support; and sales representative relationship.

High levels of dealer satisfaction are not only critical indicators of dealer profitability, but also finance providers’ market share. The study finds 51% of dealers say they “definitely will” increase their portfolio in the next 12 months with providers that earn high satisfaction scores, while only 27% of dealers will do the same with providers with low satisfaction scores. Accordingly, finance providers with high satisfaction scores could gain as much as 6 million RMB annually in additional portfolio per dealer. 

“Our study shows significant disparity in satisfaction scores among different segments of financial service companies,” said Geoff Broderick, vice president and general manager, Asia Pacific Operations, JD Power. “Dealers are more willing to work with financial providers with high satisfaction scores. China’s auto finance market is growing more and more mature. For example, the operational efficiency level in China is approaching the U.S. standard. This leads to service convergence and fierce competition. Understanding the most critical factors and achieving the key performance indicators are essential for them to improve satisfaction.”

KEY FINDINGS

• ŸDealer Satisfaction with Finance Providers Improves: Overall satisfaction with retail credit providers increases to 809 (on a 1,000-point scale) in 2016, compared with 794 in 2015, while overall satisfaction with floor planning providers increases to 817 from 804. Among the 22 providers in the retail credit segment, only two have lower satisfaction scores than last year, while the scores of five of 19 providers in the floor planning segment have declined.
• Operational Efficiency Becomes the Key Differentiator in the Retail Credit Segment: The single factor driving the highest degree of customer satisfaction with auto financing companies is the application/approval process (38%). Nearly two-thirds (62%) of dealers say captives release funds within 2 days after customers submit all materials (up from 49% in 2015), whereas in the U.S. it is 84%.[1] The study indicates that 38% of the banks and 44% credit card companies  release funds within 2 days.
• Disparity Emerges in Different Areas: In the retail credit segment, the gap between captives and banks is 26 index points in the east region of China and 102 index points in the west.  In the floor planning segment, the gap is higher for captives than for banks in larger-tier cities. However, in smaller-tier cities, satisfaction scores of banks are significantly higher than those of captives.

Segment Rankings

Toyota Motor Finance (China) Co., Ltd. ranks highest in the retail credit segment (captives and banks) with a score of 863. GMAC-SAIC Automotive Finance Co., Ltd. ranks second (846) and Shanghai Automotive Group Finance Co., Ltd. ranks third (844).

Merchants Bank Credit Card ranks highest in the retail credit segment (credit cards) with a score of 810. China Construction Bank Credit Card ranks second (788).

In the floor planning segment, Shanghai Automotive Group Finance Co., Ltd. ranks highest with a score of 866. GMAC-SAIC Automotive Finance Co., Ltd. ranks second (859) and Toyota Motor Finance (China) Co., Ltd. ranks third (846).

The study is based on responses from 2,061 dealers, representing 48 vehicle brands across 78 cities throughout China, who were surveyed on their business performance between January 2016 and April 2016.

Media Relations Contacts

Michelle Meng; JD Power; Beijing, China; +86 01 6569 2702; [email protected]

John Tews; JD Power; Troy, Michigan USA; 001 248 680 6218; [email protected]

About JD Power Asia Pacific

JD Power has offices in Tokyo, Singapore, Beijing, Shanghai, Malaysia and Bangkok that conduct customer satisfaction research and provide consulting services in the automotive, information technology and finance industries in the Asia Pacific region. Together, the six offices bring the language of customer satisfaction to consumers and businesses in Australia, China, India, Indonesia, Japan, Malaysia, Philippines, Taiwan, Thailand, and Vietnam. Information regarding JD Power and its products can be accessed through the Internet at asean-oceania.jdpower.com.

About JD Power and Advertising/Promotional Rules www.jdpower.com/about-us/press-release-info

 

Fierce Competition among Dealers Creates Need For Strong Support from Financial Service Providers in China

2015-06-03

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Shanghai: 10 June 2015 — Fierce competition, slowing sales and decreasing profitability have created greater needs by auto dealers for support from their finance providers, but these needs are not being met, resulting in lower satisfaction, according to the JD Power Asia Pacific 2015 China Dealer Financing Satisfaction (DFS) Study^SM released today.

The study, now in its second year, examines dealer satisfaction with finance providers in two segments, retail credit and floor planning. In the retail credit segment, satisfaction is measured in three factors: application/ approval process; finance provider offerings/ products; and sales representative relationship. In the floor planning segment, satisfaction is measured in four factors: finance provider credit line; floor plan portfolio management; floor plan support; and sales representative relationship.

Dealer satisfaction with finance providers declines notably in 2015. Overall satisfaction with retail credit providers is 794 in 2015 (on a 1,000-point scale), compared with 817 in 2014; overall satisfaction with floor planning providers has declined to 804 from 840.

Nearly one-half (47%) of auto dealers in China said they lost money on new-vehicle sales in 2014,[1] an increase from 28 percent in 2013. The trend continues in 2015, as inventory levels are growing and dealers are increasing incentives an average of 1,200 RMB to a new level of 20,100 RMB per vehicle in 2015. [2]

With the added sales pressure, dealers are looking to their finance providers for help with additional marketing and promotional support. While 53 percent of lenders provide effective sales and marketing tools, an increase from 48 percent in 2014, they still want more support. Their expectation for more marketing support is reflected in notably lower satisfaction ratings in the effectiveness of marketing/ promotion support for new-vehicle sales. The lower attribute rating is a primary driver of the 11-point decline in satisfaction in finance provider offerings/ products, compared with 2014 (787 vs. 798, respectively).

Without improved support, fewer dealers say they “definitely will” be staying with the same financial providers in 2015. The study finds that 63.4 percent of dealers say they “definitely will” use the same lender as their retail credit provider in the next 12 months, nine percentage points fewer than in 2014. The percentage of dealers who say they “definitely will” use the same floor planning provider in the next 12 months declines by 13 percent to 61.4 percent in 2015.

“As the financing of new-vehicle purchases is increasing at a faster rate than the average sales growth rate, finance providers need to understand the challenges dealers face and provide them with better service,” said Joseph Yang, senior manager of auto finance at JD Power China. “Financial Service companies have a tremendous opportunity to drive dealer satisfaction by providing effective sales and marketing tools to help dealers improve profitability.” 

KEY FINDINGS

• In the sales representative relationship factor of the retail credit segment, the most significant decline is in the financial knowledge of sales representative. When a salesperson provides the service most expected by dealers, overall satisfaction increases by 29 points.
• ŸApplying credit promptly impacts overall satisfaction with floor planning providers. In 2015, only 70 percent of finance providers ensure that once the payment is sent, the credit appears automatically or on the same day on the dealer’s floor plan account, compared with 84 percent in 2014.
• ŸDealers desire a deeper relationship and more advanced services from finance providers. The study finds that 68 percent of floor planning lenders provide portfolio performance reviews for dealers. However, dealers expect additional services including facilitation of a credit line or additional borrowing and inventory management consulting. When a lender provides these two services, overall satisfaction with floor planning increases by 47 and 49 points, respectively.
• ŸMass market brand captives perform better than premium brand captives; and the performance of domestic brand captives show an increasing gap in satisfaction.

The study is based on responses from 2,056 dealers, representing 48 vehicle brands across 78 cities throughout China, who were surveyed on their business performance between January 2015 and March 2015.

Media Relations Contacts

Michelle Meng; Beijing, China; +86 01 6569 2702; [email protected]

John Tews; Troy, Michigan, USA; 001 248-680-6218; [email protected]

About JD Power Asia Pacific www.jdpower.com

About JD Power and Advertising/Promotional Rules www.jdpower.com/corporate

About McGraw Hill Financial www.mhfi.com 

 

Captive Providers Outperform Banks in Dealer Finance Satisfaction in China

2014-09-11

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Shanghai: 17 September 2014 — Captive providers in China outperform banks in overall dealer finance satisfaction, according to the JD Power Asia Pacific 2014 China Dealer Financing Satisfaction (DFS) Study^SM released today.

The inaugural study examines dealer satisfaction with finance providers in two segments, retail credit and floor planning, based on three factors in each. Retail credit satisfaction is based on application/ approval process; finance provider offerings/ products; and sales representative relationship, while floor planning satisfaction is based on credit line; floor plan portfolio management; and floor plan support.

In the retail credit segment, dealer satisfaction with captives is 39 points higher (on a 1,000-point scale)than with banks (838 vs. 799, respectively). There is a notable gap in satisfaction between captives and banks in the West region (832 vs. 760, respectively) and in Tier 4 cities (849 vs. 713, respectively). Banks perform highest in the North region (830) and in Tier 1 cities (810).

“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 JD Power China.  “This proves the fundamental rule that it is much easier to increase sales and retain customers when the customers are satisfied.”

Captives and banks in the retail credit segment each perform highest in the application/ approval process factor (856 and 806, respectively). However, compared with banks, captives deliver more often on three key performance indicators: can reach the credit staff at any time (45% and 38%, respectively); granting approval of application within two days (66% and 25%, respectively); and releasing funds within two days (54% and 27%, respectively). Captives and banks perform lowest in the finance provider offerings/ products factor (813 and 787, respectively).

In the retail credit segment, captives outperform banks in the use of digital communication channels by sales representatives as their main contact with the dealerships. Captives use digital communication channels at much higher rates than banks, most notably email (60% and 24%, respectively). Satisfaction is highest when salespersons at the dealership use live chat on smartphones or tablets to communicate with their lender (859), followed by online chat (854) and email (844). Satisfaction is lowest when communication is conducted via the telephone (818).

In the floor planning segment, dealer satisfaction with captives is higher than with banks (854 vs. 831, respectively), however this relationship varies by size of city, region of the country and domestic vs. international brands. Banks have higher satisfaction than with captives in Tier 4 cities (805 and 789, respectively), while satisfaction with banks and captives in the South region is similar (808 and 812, respectively). In addition, banks and captives have similar satisfaction among dealers of domestic brands (817 and 820, respectively).

Credit line is the highest-weighted factor in the floor planning segment; however, both captives and banks perform lowest in this factor (850 and 828, respectively). Although dealers expect their finance providers to offer a line of credit to fully meet their needs on inventory turnover of funds, this only occurs 29 percent of the time. When finance providers deliver on this KPI, satisfaction averages 866 but drops to 792 when it is not met.  

Captives also outpace banks in floor planning product variety. In addition to new-vehicle service, captives provide a wider range of services than banks in floor planning offerings, such as display cars in the sales area and at auto shows, new cars for sub-dealers and spare parts inventories.

“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

• 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.[1] The market potential for dealer finance providers is still promising based on the anticipated increase in passenger-vehicle sales in China.
• ŸThe 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.
• ŸProgram 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.
• ŸDealers 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.

About JD Power Asia Pacific: www.jdpower.com

About JD Power and Advertising/Promotional Rules www.jdpower.com/corporate

About McGraw Hill Financial www.mhfi.com