Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

Luxury buyers more likely to secure direct financing: J.D. Power

November 17, 2010

Direct lending has gained popularity, particularly among luxury new-vehicle buyers, where more than one in five secure financing without assistance from the dealer, according to the J.D. Power and Associates 2005 Consumer Financing Satisfaction Study.


The study, now in its 10th year, measures customer satisfaction with the vehicle financing process. Four factors are examined to determine customer satisfaction with an automotive finance provider: provider offering, application/approval process, payment/billing process and customer contact experience. 

The study, released Dec. 20, finds that 22 percent of luxury new-vehicle buyers secure a loan without the assistance of the dealer—an increase of 8 percent from 2004. Banks are pursuing vehicle shoppers with aggressive marketing campaigns tht include direct mail pieces, rebates and other incentives in an effort to encourage consumers to finalize their loan prior to visiting the dealership.


As a result, captive finance providers are simultaneously pursuing banking charters that enable them to offer a full spectrum of banking products. 

"The vehicle loan financing market is becoming even more crowded, and as banks, credit unions and independents become more aggressive with their direct-lending programs, captive providers will be challenged more than ever to defend their turf and retain their customer base," said J.D. Power’s David Lo.


"With nearly one-half of direct-lending customers and one-third of indirect customers researching their financing options online, the Internet has become an effective tool to attract and convert shoppers into buyers." 

Ford Credit ranks highest in non-luxury lease and luxury lease satisfaction. The 2005 study marks the fourth straight year Ford Credit ranks highest in non-luxury lease satisfaction. In non-luxury leasing, Ford Credit performs well above the industry average in three of the four factors examined within the study, including provider offering, application/approval process, and payment/billing.


In luxury leasing, Ford Credit had exceptional ratings from consumers in provider offering and payment/billing, both thought to be key factors in achieving overall satisfaction. 

Improving 23 index points over 2004, GMAC ranks highest in luxury loan satisfaction. GMAC performs particularly well among luxury loan customers in all key areas of satisfaction, including variety of payment options, reasonableness of financial terms, timeliness of the first statement and clarity of billing statements.


Honda Financial Services (HFS) ranks highest in the non-luxury loan segment, performing well in payment/billing, provider offering and application/approval process. HFS is one of the only captive finance providers to improve in the non-luxury loan segment compared to 2004. HFS sets the benchmark in satisfaction with the competitiveness of non-luxury loan interest rates. 

The study also finds that the proportion of leases to loans has increased for the first time in five years. The proportion of luxury buyers who leased their vehicles with the assistance of the dealer increased 9 percentage points from 2004 to 64 percent. Among non-luxury buyers, 22 percent leased their vehicles, up from 18 percent in 2004.


Leasing is becoming more popular in part due to rising interest rates. The average interest rate paid on loans among non-luxury vehicle buyers has increased from 4.2 percent in 2004 to 5 percent in 2005. Among luxury buyers, the average interest rate paid increased to 4.5 percent in 2005.