The J.D. Power 2015 U.S. Consumer Financing Satisfaction Study gave two specific areas where auto finance providers need to focus their efforts on servicing processes.
Stemming from the study that examines the overall customer experience with financing either an automotive loan or lease, J.D. Power analysts determined that finance companies should be anticipating the changing needs of their contract holders as well as the diversity of their customers to achieve high levels of satisfaction.
The study measures satisfaction among customers who financed or leased their vehicle indirectly through a dealer or directly through an auto finance provider in four key factors:
— Onboarding process
— Billing and payment process
— Website
— Phone contact
The study is conducted in two vehicle segments: luxury and mass market. Satisfaction is calculated on a 1,000-point scale.
“The higher-performing companies do a good job of satisfying their customers throughout the life of the loan or lease,” said Mike Buckingham, senior director of the automotive finance practice at J.D. Power.
“Once the new-car smell goes away, it's the day-to-day handling of the account that is critical, and that's where some companies fall,” Buckingham continued.
Buckingham noted that most of the providers do a good job in the initial onboarding and loan/lease setup, but as consumers experience changes in their life or have informational needs, getting quick support from their provider is critical in order to maintain high levels of satisfaction.
“The higher-performing brands are adept at satisfying a diverse consumer base that has different needs based on both age and product type,” he said.
Following are some of the key findings in this year's study:
— Luxury Car Buyers More Satisfied. Overall satisfaction is 840 in the luxury segment and 817 in the mass market segment.
— Loan and Lease Experiences Not Created Equally. The loan and lease experience differs by segment, with overall satisfaction in the luxury segment similar for loans and leases (840 and 839, respectively). In contrast, satisfaction in the mass market segment is significantly higher for loans than for leases (821 and 798, respectively).
— Satisfaction Equals Loyalty. Ensuring customer satisfaction is critical for finance providers, as more than 96 percent of highly satisfied customers (overall satisfaction scores of 900 points or more) say they "definitely will" use their current lender in the future.
— Dealer's Choice. Nearly 40 percent of customers indicate they selected their provider based on inputs other than dealer recommendations.
2015 US Consumer Financing Satisfaction rankings
Lincoln Automotive Financial Services (873) ranked highest in the luxury segment for a third consecutive year and performed particularly well in the onboarding process, billing and payment process and phone contact factors. BMW Financial (853) ranked second and Lexus Financial Services (850) came in third.
Ford Credit ranked highest in the mass market segment with a score of 838. The study showed Ford Credit performed particularly well in the onboarding process and phone contact factors.
Bank of America (834) ranked second, and Toyota Financial Services (832) came in third third.
The 2015 U.S. Consumer Financing Satisfaction Study is based on responses from 19,522 new- and used-vehicle purchasers or lessees who obtained a vehicle loan or lease. The study includes vehicles financed for model years 2012 through 2015. The study was fielded from late July through early September.
Luxury Brand Overall Satisfaction ranking
(Based on a 1,000-point scale)
Lincoln Automotive Financial Services 873
BMW Financial Services 853
Lexus Financial Services 850
Mercedes-Benz Financial Services 843
Acura Financial Services 842
Audi Financial Services 842
Luxury Average 840
Volvo Car Financial Services 838
Wells Fargo Dealer Services 837
Chase Automotive Finance 834
Ally Financial 832
Jaguar Financial Group/Land Rover Financial Group 825
Infiniti Financial Services 801
Bank of America 795
US Bank 781
Mass Market Brand Overall Satisfaction Ranking
(Based on a 1,000-point scale)
Ford Credit 838
Bank of America 834
Toyota Financial Services 832
Volkswagen Credit 827
Capital One Auto Finance 826
Kia Motors Finance 819
Subaru Motors Finance 819
World Omni Financial Corp. 818
Chase Automotive Finance 817
Mass Market Average 817
Honda Financial Services 815
Ally Financial 812
Wells Fargo Dealer Services 808
US Bank 807
Hyundai Motor Finance 806
GM Financial 803
NMAC 797
TD Auto Finance 797
Mazda Capital Services 792
Citizens One 784
PNC Bank 777
Chrysler Capital 776
Huntington National Bank 773
Suntrust Bank 756
Fifth Third Bank 749
Santander Auto Finance 743
GO Financial announced on Monday that its first back-end pool payments began this month.
Executives highlighted some of the early GO dealer-partners are seeing the benefits from their first pools maturing and now are receiving back-end pool payments based on the strong performance of their loans.
The company also mentioned many of GO’s other early dealer partners with closed pools chose to take advantage of GO’s Cash Out Now option, whereby these dealers accelerated the payout of their pools years ago rather than waiting for their pools to mature.
“Several of our dealers took advantage of GO’s Cash Out Now option over the past few years, and we always hear from dealers that they like this option, knowing they have flexibility to access their pool equity early if they need to. We refer to it as dealer peace of mind,” GO Financial president Colin Bachinsky said.
“These options provide additional flexibility for GO’s dealer partners to participate in the profits on performing loan pools,” Bachinsky continued.
Bachinsky went on to note that as GO’s portfolio continues to mature, more dealers will enjoy the benefits of receiving back-end pool payments.
“GO believes this milestone is just another example demonstrating that GO’s program provides the most profitable finance option for its dealers, and GO is proud to celebrate this achievement with its participating dealers,” the company said.
While many auto finance executives are gearing up for Thanksgiving with family and friends, it appears leadership of the Federal Reserve is not only prepping for turkey, too, but also mulling over how much interest rates should be increased.
In a little more than three weeks, the policy-setting Federal Open Market Committee will convene for the final time this year when the group is expected to finally make an adjustment after passing on the move during each of its previous seven gatherings so far in 2015.
In fact, according to a recent online report from Bloomberg, most economists in a Bloomberg survey and traders of federal funds futures expect an uptick from the near-zero current reading, where the Fed’s key lending rate has been since 2008.
Bloomberg’s report cited recent comments from John Williams, president and chief executive officer of the Federal Reserve Bank of San Francisco, indicating that policymakers are watching a wide array of economic indicators in their process to move the rate up to 2 percent.
“Assuming that we continue to get good data on the economy, continue to get signs that we’re moving closer to achieving our goals,” Williams said while speaking with reporters at the University of California at Berkeley on Saturday. “There’s a strong case that can be made in December to raise rates.”
The comments from Williams this past weekend mirror what the San Francisco Fed overseer indicated during a presentation to the Arizona Council on Economic Education earlier this month in Tempe, Ariz. The appearance came shortly after the FOMC made its most recent pass on raising the interest rate just before Halloween.
“To my mind, the decision was a close call, in part reflecting the crosscurrents we’re navigating: On one hand, the U.S. economy continues to grow and is closing in on full employment. On the other, in large part due to developments abroad, inflation has remained lower than we’d like,” Williams said.
“In any event, we should fully celebrate that the economic expansion is entering its seventh year with good momentum,” he continued.
And as far as what might happen when the committee gathers again beginning on Dec. 15, Williams maintained the approach the Fed has taken since the recession.
“Our decisions are based on a careful analysis of two sides of the ledger: The one that argues for a little more patience and the one that prefers the ‘sooner rather than later’ approach,” he said.
“Experience shows that an economy that runs too hot for too long can generate imbalances that ultimately lead to either excessive inflation or an economic correction and recession,” Williams continued.
“I also want to stress that when we’re looking at monetary policy choices, it’s important to remember that we’re in a very different place now than when we first instituted extremely accommodative policy,” he went on to say.
“Since the dark days of late 2009, we’ve added 13 million jobs; more than 3 million of those came last year, and most of those were full-time,” Williams added. “It’s been a tough journey back, and when I look ahead, I’m highly conscious that monetary policy played a crucial role in healing a once-ailing economy.”
The week after Thanksgiving, PaymentVision will hold a free webinar on the importance and benefits of tokenization, or when applied to data security, the process of substituting a sensitive data element with a non-sensitive equivalent.
The webinar covering the currently very relevant topic is scheduled for Wednesday, Dec. 2 from 2:30 to 3:30 EST.
During the online event, Laurie Nelson, general counsel and chief compliance officer at PaymentVision, will discuss the security importance of tokenization, the negative impacts of some of recent history’s largest data breaches, and some additional security measures that are built to keep information safe, the company shared.
“Security and compliance should never be taken lightly,” Nelson said. “It’s extremely important for measures to be in place that would better protect the customer in addition to your company. Failing to do so may result in large fines, loss in profits, and a damaged brand. Tokenization is a great, cutting-edge way of keeping sensitive financial information data safe while also staying within the rules of various compliance programs.”
The event is free, but advanced registration is required. See here to register.
Veros Credit announced it has opened a new Regional Business Center in the Dallas area. The company reported the new center will assist in the company’s growth efforts in Texas.
The focus of the new center will be to provide a local presence in the state for customers and build service levels and dealer penetration. And both funding and credit will be managed from the new Dallas office for the Texas market.
“Having a Business Center located in Dallas has always been part of our long term strategy,” stated Cyrus Bozorgi, president and chief executive officer of Veros Credit. “Texas is an important market for Veros, and this office shows our commitment to our dealer customers, to be a presence and a valued business partner for years to come.”
Kyle Musil, who is a division manager for Veros Credit, will be overseeing operations and sales for the new Dallas Business Center.
“Our goal is to build long lasting relationships with a core set of dealers in the Texas area, and leverage our local presence to become an integral part of the dealerships’ culture of success. Having great dealer partners has been one of the integral pieces of the 20 year success story that Veros has built, and we intend to build those same relationships throughout the state of Texas and beyond,” said Musil.
The new office is located at 101 East Park Blvd., Suite 600, Plano, Texas 75074. Business Center employees can be reached by phone at (972) 516-3750.
To the delight of many in the automotive industry, the House of Representatives voted on and passed a bill aimed at altering the Consumer Financial Protection Bureau’s handling of indirect auto financing.
With a vote of 332 to 96, the House passed what the American International Automobile Dealers Association labeled a “common sense piece of legislation,” otherwise known as the Reforming CFPB Indirect Auto Financing Guidance Act.
If it passes through the Senate and is signed by the president in its current state, the legislation will amend the Consumer Financial Protection Act of 2010 by directing the CFPB, when proposing and issuing guidance primarily related to indirect auto financing, to:
- provide for a public notice and comment period before issuing the guidance in final form;
- make publicly available all information relied on by the CFPB;
- redact any information exempt from disclosure under the Freedom of Information Act;
- consult with the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Department of Justice; and
- study the costs and impacts of the guidance to consumers and women-owned, minority-owned, and small businesses.
The act would also nullify the CFPB Bulletin 2013-02, otherwise known as the Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act, which was published in 2013.
"The CFPB is clearly trying to eliminate a consumer's ability to receive a discount on credit in the showroom,” said Peter Welch, the president of the National Automobile Dealers Association. “It is reasonable for Congress to ask for minimal due process to protect consumers.”
Cody Lusk, president of AIADA, issued the following statement on Thursday following the act’s passage through the House:
"International brand automobile dealers vehemently oppose discrimination in any form and fully support the efforts of the CFPB to eliminate it from the marketplace,” Lusk said.
"However, the CFPB has failed time and again to fully disclose its methodology for measuring the presence of disparate impact or provide transparency in issuing guidance to auto lenders. H.R. 1737 is a common sense solution to a problem the CFPB has itself created by working to end dealer discounts on financing without considering the negative impact on consumers.
"The House today chose to support small businesses by pushing back against CFPB policies that reduced competition among lenders and, as a result, raised rates on consumers."
Even though lease credit approvals are down slightly this month, rates remain unusually high, prompting analysts to discuss the factors behind the surge.
According to Swapalease.com, lease credit approvals fell to 75 percent this month, down a bit from the 80 percent mark reached in October.
But even with that slight decline, the approval rates for the year improved to 72.4 percent, which the company shared is a “healthy mark for credit approvals.”
And over the last three months, the site reported the lease credit approvals rate of 80.4 percent is the highest Swapalease.com has ever seen. With this in mind, Swapalease.com management wasn’t surprised to see rates slip a bit this month after 90 days of unusual strength.
This market strength prompted Swapalease.com to look into patterns into where and how the credit approval rate has spiked so high in the second half of the year.
One reason Swapalease.com analysts think approval rates are on the way up is the leasing might be attracting “a different type of shopper profile."
One factor the site is looking into is the fact that more electric vehicle buyers have been leasing at higher rates.
According to a CNBC report, excluding Tesla, lease penetration in the EV market is at 75 percent this year. Back in 2011, leasing only represented 27 percent of the market.
For comparison, leasing penetration across all car segments sits at just 28 percent, according to Edmunds.com.
“So often we focus on the broader economy to see if there is a correlation with the lease credit approval rate,” said Scot Hall, executive vice president of Swapalease.com. “While this is an important indicator, we’re always looking to see if there are other reasons, such as different demographics leasing more or, as was the case earlier this year, the impact student loans may have on car shopping.”
Personal finance company Springleaf Holdings Inc. recently announced it will be moving forward with its purchase of OneMain Financial Holdings LLC after reaching a settlement with the Department of Justice, as well as the Attorneys General of seven states.
The company shared the details of the settlement have been filed with the U.S. District Court, Washington, D.C., and approval of a stipulated asset preservation order is required prior to closing the deal.
The company said it anticipated approval will come through shortly, and the closing will proceed immediately after.
Springleaf management said that with the new combined company — which will be renamed OneMain Holdings Inc. upon the closing of the acquisition — it expects to generate core net income of $830 million to $900 million, or $6.20 to $6.70 per share in 2017.
Here are the terms of the agreement with the DOJ and the state Attorneys General:
First, Springleaf will sell 127 branches in 11 states to Lendmark Financial Services of Covington, Ga.
These branches make up 6 percent of the company’s branches and $608 million, or 4 percent, of the company’s receivables. The sale to Lendmark is expected to close April 1.
Jay Levine, president and chief executive officer of Springleaf, said, "The transformational combination of Springleaf and OneMain will create the premier personal finance business in the United States, with branches across 43 states and 2.4 million customers.
“This will be a company that we believe is financially strong, committed to responsible lending and positioned for future growth. In addition, we share similar cultures and values, including excellence in customer service and a deep commitment to the local communities that we serve. We look forward to welcoming OneMain's talented team members to the Springleaf family, and to creating even greater value for all stakeholders,” he continued.
The combined company will be led by Levine, with the executive management team including leaders from both Springleaf and OneMain.
The combined company will tout nearly 1,850 branches in 43 states, after the sale of the branches to Lendmark.
SubPrime Auto Finance News is honoring Scott Phillips, vice president of credit risk and business process at Lendmark Financial Services, today at the Re3 Conference in Scottsdale, Ariz. Phillips will receive the Re3 Automotive Executive of the Year award, presented by CARS.
TransUnion’s Industry Insights Report found that outstanding auto loan balances surpassed $1 trillion in the third quarter, an 11.1 percent jump year-over-year. But contract holders appear to be maintaining their payments on that growing balance total since delinquencies — the rate of borrowers 60 days or more delinquent on their account — continue to remain flat, coming in at 1.16 percent in both Q3 2014 and Q3 2015.
During a phone conversation with SubPrime Auto Finance News, TransUnion senior vice president and automotive business leader Jason Laky said, “We don’t expect any surprises from a delinquency perspective.
“Auto lending and performance is correlated to the strength in the economy, particularly employment,” Laky continued. “As long as employment continues to grow strongly and consumers have confidence in the economy we’ll continue to see growth in auto sales and financing. Consumers who believe they’ll be employed for a considerable time are willing to go forth and take on a loan to pay for a car.”
In the past year, auto loan balances have increased $101 billion to $1.008 trillion in Q3, according to the latest data.
TransUnion reported nearly 75 million consumers have an open auto account, an increase of 5 million since Q3 2014 when the figure stood at 69.5 million. Analysts pegged the number of consumers with access to an auto loan grew 2 million quarter over quarter from 72.5 million in Q2 2015.
TransUnion also shared information for the subprime space.
Auto loan balances for the subprime risk tier — those consumers with a VantageScore 3.0 credit score lower than 601 — remain the smallest segment with 15.3 percent, or $154 billion, of the total balance. However, analysts pointed out this figure is the highest share of auto balance observed for the subprime risk tier since Q1 2011.
Consumers in the prime or better risk tiers —those with a VantageScore 3.0 credit score higher than 661 — represent $670 billion of the $1 trillion in balances.
The average balance across all auto loan accounts was $14,515 in Q3, a 2.7 percent increase year-over-year, and the slowest pace of average balance growth since Q4 2011. The average subprime auto loan balance increased 4.2 percent from $13,328 in Q3 2014 to $13,890 in Q3 2015, the lowest growth rate since early 2012.
“As total auto loan balance rises, we’re seeing controlled and deliberate growth by lenders,” Laky said. “Consumers continue to feel confident in their employment or job prospects, and their appetite for new auto loans reflects this confidence.”
“More consumers have access to auto loans, yet delinquencies remain low as they continue to responsibly manage their payments,” he continued. “Consumers are taking on more and bigger auto loans in today’s low-rate environment, but we see no cause for concern as delinquencies remain steady.”
Viewed one quarter in arrears (to ensure all accounts are reported and included in the data), TransUnion indicated new auto loan originations exceeded 7 million for the first time in Q2. Up 13.5 percent from Q1 and 6.4 percent from Q2 of last year, originations reached 7.3 million this past quarter.
Along with origination growth, the average new auto loan balance grew to $20,016 in Q2 2015. The average balance increased $567 from the average balance in Q2 2014 of $19,449. New subprime auto loan balances increased 3.7 percent year-over-year from $16,781 in Q2 2014 to $17,357 in Q2 2015.
Another element Laky highlighted with SubPrime Auto Finance News is how much younger borrowers are tapping the market.
TransUnion noted consumers age 30 and younger continue to finance vehicles at a healthy pace, with more than 1 million more young adults opening an auto loan or lease in the past year, analysts determined 11.7 million consumers under the age of 30 have an auto loan or lease reported to TransUnion. That figure is up 1 million, or 9.6 percent, from Q3 2014.
“Contrary to some of the messages about consumers buying and financing cars in this new sharing economy, it’s not true,” Laky said. “As younger consumers are getting settled and employed, building their lives and their families, they’re realizing that they need cars to get the things done that they want to do in their lives, and they’re out there taking loans for them.”
So whether the account holders are young or more mature, Laky maintains the health of the auto-finance market is good, even if some conditions deteriorate.
“If the economy begins to turn and employment increases, that’s when auto lenders can begin to worry about an increase in delinquency,” Laky said. “Even then, I wouldn’t expect a dramatic increase in delinquencies.
"Even in the prior recession, we didn’t see a large increase in delinquencies even as other asset classes were having a big jump,” he continued. “The reason is the auto loan remains the priority loan payment in the consumer’s wallet. It’s a question of how important cars are both in utility for getting to and from a job and getting your family to and from places as well as the lifestyle benefit of having a nice car.”
JM Family Enterprises president and chief executive officer Colin Brown recently promoted Ron Coombs to the position of senior vice president and chief financial officer, overseeing the company’s financial operations.
Coombs joined JM Family in 1999 as vice president for one of its major business units, World Omni Financial Corp. In 2001, he was promoted to CFO of JM&A Group, another primary subsidiary.
For the past seven years, he has served as JM&A’s chief operating officer where he was responsible for all sales and operations functions. Coombs has also been a part of JM Family’s EMT for 10 years, which directs the development and implementation of the company’s long-range planning and strategies for future growth.
Prior to JM Family, he worked at Key Bank and the Federal Reserve Bank in Cleveland.
“Ron has been a respected and valued member of our executive management team (EMT) and throughout his diverse leadership roles, he has demonstrated business foresight with a comprehensive understanding of our operations,” Brown said.
“He brings a broad perspective to his new position and I feel fortunate to have such an energetic, experienced colleague working alongside the best associates in the business,” Brown went on to say.
Coombs received his master’s degree in business administration from Case Western Reserve University and his bachelor’s degree in economics from Albion College. He and his wife reside in Boca Raton, Fla., with their three children.
