The profitable meeting with the auto dealership’s finance department as vehicle buyers are presented with the dealer’s recommended financing options and offered add-ons (aka sell ups) is evolving to more of a digital experience. It is also being shaped by consumer demand. According to the J.D. Power 2020 U.S. Consumer Financing Satisfaction Study released today, more vehicle buyers than ever have turned to digital channels when it comes to pre-transaction research and lining up financing options for a new vehicle.
It’s just another example of how the ongoing Covid crisis will change well-established business practices in the auto industry. Auto dealers, who tend to be Republican in AutoInformed’s experience can thank the ousted -ex-president Trump for this very real threat to their profitability. Wearing a mask won’t help the spread of this change as Covid continues to expand unabated due to the lack of a national policy – one that won’t be forthcoming until January 20th 2021.
“The pandemic accelerated a trend toward digital auto loan origination that has been developing for some time,” said Patrick Roosenberg, director of automotive finance intelligence at J.D. Power.
“Many buyers who have secured financing digitally had a great experience and won’t go back to the old way of doing things—even when COVID-19 is no longer a factor,” he predicts.
The 2020 Study
- More consumers complete digital credit applications, and like it: Nearly one-third (32%) of auto loan borrowers completed a digital credit application, with 22% using the lender’s website and 10% using a mobile app. The frequency of digital loan applications has increased eight percentage points from last year. The average customer satisfaction score for those applying for an auto loan digitally is 887 (on a 1,000-point scale), while the average customer satisfaction score for those applying at a dealership is 842.
- A trend that signals staying power beyond the pandemic: A total of 40% of borrowers say they prefer at least part of the loan origination process to be digital when they purchase their next vehicle. The number of borrowers who say they will apply for financing digitally (via website or mobile app) in the future is up three percentage points from 2019, while the number of borrowers who say they will secure financing through the dealership is down four percentage points year over year.
- Direct financing gains traction, led by luxury segment: While 85% of auto loan customers still secure their financing through the dealership, more borrowers than ever are pursuing direct financing. A total of 15% of borrowers in this year’s study secured direct financing, up three percentage points from a year ago. In the luxury segment, that number is up six percentage points to 26% of all borrowers.
- Digital account management and bill pay improves customer satisfaction: A growing number of borrowers also are turning to digital channels for loan account management and bill pay. During the past two years, use of lender mobile apps for account management has increased eight percentage points and use of the website has increased two percentage points, while offline account management has declined three percentage points. Customers have the highest levels of overall satisfaction (884) when using lender’s mobile app.
- Lincoln Automotive Financial Services ranks highest in customer satisfaction among luxury brands, with a score of 899.
- Capital One Auto Finance (885) ranks second and
- BMW Financial Services (881) ranks third.
- BB&T now Truist ranks highest among mass market brands, with a score of 879.
- Capital One Auto Finance (870) and Ford Credit (870) rank second in a tie.
The J.D. Power U.S. Consumer Financing Satisfaction Study measures overall customer satisfaction in five factors (listed alphabetically): billing and payment process; mobile app experience; onboarding process; origination process; and website experience. The study was fielded in July-August 2020 and is based on responses from 10,103 customers who financed a new or used vehicle through a loan or lease within the past three years.