Mergers and tighter credit standards have hurt relationships between banks and automobile dealers, according to a J.D. Power & Associates survey.

David McKay, senior manager of auto finance research for the quality measurement company, said its annual survey of 3,000 U.S. dealerships revealed increasing dissatisfaction with banks and other companies that provide car loans and lease and dealer financing.

J.D. Power said 69% of the dealers were either "very" or "somewhat" satisfied with the service they were getting from finance sources. That was down from 71% a year ago and is the lowest in the four years that the Agoura Hills, Calif., company has been tracking it.

The survey covered all types of auto finance companies. Banks provide about 54% of all auto loans, Mr. McKay said.

Of the 10 biggest banks building national auto lending businesses, nine had lower satisfaction ratings than in 1996. The exception was Chase Manhattan Corp.

Among those that slipped in dealer ratings were Banc One Corp., BankAmerica Corp., KeyCorp, and Wells Fargo & Co.

In some cases, Mr. McKay said, dealers were affected by bank mergers that often led to changes in credit policies and disruption of business. That was the case with Wells Fargo, which is still digesting its 1996 acquisition of First Interstate Bancorp.

"This is still an old-fashioned business that requires face-to-face communication," Mr. McKay said.

Jeffrey Standen, senior vice president of the dealer credit division at National City Corp., Cleveland, said companies in the auto finance business were tightening credit standards in the second half of last year and the first couple of months of 1997 in response to higher delinquencies and chargeoffs.

"Through early '97 most or all of the banks were experiencing higher delinquencies and chargeoffs," Mr. Standen said. "Typically that would make financing sources nervous."

"It's hard to tell people no and have them think they're getting great service," Mr. McKay said.

But there may be other reasons for the perceived quality decline relating to bank and dealer size.

The Consumer Bankers Association's recently published auto finance survey noted "sensitive areas" in bank-dealer relationships, such as the terms of dealer reserves and chargebacks. Large and small lenders were more likely than midsize lenders to charge the contract rate less a retention, or "buy" rate.

Smaller banks were the most likely to require up-front payments of dealer reserves.

Almost all banks charged back dealers' reserves when loans were prepaid, but there were signs that small banks try to be competitive by not charging back in cases of repossession.

J.D. Power said high-volume dealers-those that sell or lease more than 700 vehicles a year-were less satisfied with lenders than smaller outlets were. Mr. McKay said the best relationships are between small banks and local car dealers.

Mr. Standen of National City said auto selling is becoming more and more dominated by mega-dealerships. The J.D. Power survey said the 34% of high- volume dealers account for 75% of all auto loans and leases.

"There are so many things happening in the market," Mr. Standen said. "The industry is going a million miles an hour (and) financial sources are trying to figure out a way to serve the dealers," he added.

National City, which has $6 billion in auto loans and leases and dealer financing, has not sensed any dissatisfaction among its dealer associates.

"The way you know that is when the dealers start to leave you," Mr. Standen said.

Likewise, Joseph Moran, senior vice president and manager of the national dealer services business at Comerica Inc., Detroit, said he is "not aware of a general undercurrent of dissatisfaction among dealers."

Mr. Moran, whose area primarily provides financing for dealerships rather than consumers, said dealers can get upset over policies that the auto companies and their finance subsidiaries set. "I think the confusion leads to dissatisfaction," he said.

Despite the generally negative quality trends, J.D. Power said four companies-including one bank-excelled in three categories of financing.

First Security Bank, a unit of First Security Corp. of Salt Lake City that emphasizes indirect auto lending, ranked highest in dealer retail credit satisfaction. BMW Financial Services, a unit of the German car manufacturer, was tops in retail leasing satisfaction.

Ford Credit and Toyota Motor Credit Co. earned the best ratings for dealer floor-planning satisfaction.

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