Monday, February 18, 2008 It has taken more than a decade, but 2008 could be a breakout year for those who want electronic vehicle finance contracts to supplant paper ones. That would be a big step toward paperless auto sales.
E-contracts and other electronic documents could limit the time consumers spend in showrooms and finance and insurance departments. It even could make the dealership visit optional.
AutoNation Inc., the largest U.S. dealership group, is rolling out what it calls AutoNation Direct. The Internet-based sales channel is designed to allow customers to order and finance a vehicle online and take delivery at home. Or buyers could go to the dealership only to review and sign paperwork and pick up the car or truck.
That would be a revolutionary change in car shopping — maybe the biggest since the franchise system emerged a century ago.
Tipping point
"There is an inflection point," said Christopher Morris, director of F&I services for Reynolds and Reynolds Co. The Dayton, Ohio, company sells software, services and forms to dealerships.
"In the next 24 to 36 months, you'll see e-contracting go from maybe 5 percent to 40 to 50 percent of the industry," Morris told Automotive News.
Even then, it still could take years for dealers in states that have not switched from electronic to paper vehicle titles to offer paperless transactions. But each page of the deal jacket that can be transferred from paper to an electronic document potentially represents a faster, more convenient process for the customer.
Executives at Reynolds and Reynolds and its chief competitor, ADP Dealer Services, say they are expanding programs that integrate e-contracts with their widely used online dealer communication systems.
Many dealers have been unwilling to invest in the technology needed to handle e-contracts unless they can present the same forms to multiple lenders using their existing dealer management software. At the same time, suppliers have been reluctant to invest in F&I technology that dealers do not want to buy.
Chrysler Financial is ahead of other automakers' captive finance companies in adopting electronic contracts, experts at ADP and Reynolds say. But even Chrysler Financial uses e-contracts in only 20 states, says Stephen Luyckx, the captive's senior manager of point-of-sale strategies.
It has been hard to develop a single system that will meet different states' requirements for disclosure and other financial data, says Luyckx (pronounced "Loiks").
Checking for errors
While the spread of e-contracts has been slow, other online applications are much more widely used. Dealers affiliated with Chrysler Financial now place nearly all of their customer credit applications online, Luyckx says.
More than 80 percent of Chrysler Financial dealers use the company's AutOrigination program. The automated system checks the accuracy of data entered into finance contracts. The system monitors customer names, addresses and personal data, as well as the proper application of incentives.
Before AutOrigination, Luyckx says, nearly a third of all finance contracts administered by Chrysler Financial included some sort of error. Many were trivial mistakes that a dealership could fix by itself. But others required the customer to return to the dealership to sign a new finance contract — potentially with a higher monthly payment.
AutOrigination was designed to catch mistakes in leasing contracts, which were more complicated than vehicle loans and more prone to errors, Luyckx says. But the system now is giving Chrysler Financial a leg up on creating an entire e-contract, he adds.
About 300 Chrysler Financial dealerships offer electronic contracts. Luyckx says he expects that number to rise greatly as the captive rolls out an e-contract program that dealers in 48 states can use. That program could be in place as early as the first quarter, he says.
Can't please everyone
Courtesy Chevrolet in Phoenix is one of the nation's most advanced dealerships in online sales. Scott Gruwell, the dealership's new-vehicle director, says online leads account for about 40 percent of the store's unit sales.
But even though the dealership can handle sales and financing online, he says employees and customers still prefer to complete at least part of the process in person.
"It sounds like an easy transaction, but it's not," Gruwell says. "We like to have people come in to have the paperwork done to make sure there's no fraudulent activity, either on the customer's behalf or the salesperson's behalf. It's a protection for both sides."
F&I experts say developing a universally acceptable e-contract faces obstacles aside from variations in state laws. They note that at least four parties are involved in electronic transactions: technology providers, dealers, consumers and financial institutions.
"Dealers have to change their processes and invest in signature pads, laser printers and training for their people," said Morris of Reynolds and Reynolds. He said dealership F&I employees "are trying to reduce the anxiety of customers who aren't used to doing it this way."
At the same time, Morris said, banks and other financial institutions must be convinced that e-contracts are just as binding and accurate as paper ones. Wall Street firms that buy packages of securitized auto loans also must be convinced, he said.
In securitization, an auto lender sells the income from a package of loans. In effect, investors who buy securitized loans collect the money over time. Lenders earn less than if they collected the loans but get paid sooner. That frees money to make more loans.
Some investors have been securitizing loans that include e-contract transactions for about four years, Morris said.
"Banks are notoriously conservative and slow-moving," he said, "but there are people in the market who have been doing this. We are starting to see signs that we are reaching an inflection point."
Source: http://www.autonews.com/ |
