Do Automotive Captive Finance Companies Help Keep Customers Loyal?
So you just bought your new Chevy Envoy or Toyota Corolla. You financed through GM Financial or Toyota Financial Services. Are you more likely to buy another GM or Toyota product as a result? For the auto companies and dealers, financing through a captive finance company is another nice source of income, but do they do anything to help retain customers? The answer is yes.
Read as “the percentage of people who originally bought their vehicle new who financed/leased through one of these financing/leasing options (credit union, commercial, or captive) and who came back and bought new vehicle of the same brand.
Data from Maritz’ 2012 NVCS study reveals that captive financing companies have a profound impact on loyalty.
You can see that nearly 50% of those who financed their disposed (originally bought new) vehicle through a captive finance company came back and bought another new vehicle from the same brand. That is to say on average a 50% loyalty rate. This is in comparison to 42% for Commercial Banks and 32% for Credit Unions.
So by dealers promoting captive financing options, they are not only getting the revenue from those captive financing options but they are also keeping that customer in the same brand fold. In short, captives beyond being lucrative, also serve to help keep customers loyal. So the question is, what is driving this incremental loyalty by financing through a captive? Is it a better financing experience, brand inertia, the type of customer who can qualify for captive financing or something else?