By Todd Hutto, Associate Vice President of Operations, Dealertrack Digital Document Services
Even as more of the car buying process moves online and the desire for a digitally connected online-to-in-store experience grows stronger, many dealerships continue to contract on paper. These contracts and their entire funding packages require extensive handling and manual data entry by lenders before loans can be funded.
It’s been the “norm” to take anywhere from a few days to several weeks for these contract packages to go from the dealers’ desks through the lenders’ review and approval process to finally be funded. But technology is shortening the tolerance of that waiting game — and with dealers facing high competition, ongoing margin compression and a plateauing SAAR, they’re scrutinizing every aspect of their business to protect their bottom line.
This creates a ripe opportunity for a lender partner to swoop in and establish their organization as the fast funding hero, significantly reducing dealers’ contracts in transit and providing the freer cash flow that helps them stay profitable — and can help that lender ultimately earn more business.
Data from the Federal Reserve Bank of New York shows there were 108 million Americans with auto loans in 2018. Additionally, Experian data from around the same time highlighted that nearly 85 percent of auto shoppers financed their purchase. With loans significantly outweighing cash sales at dealerships, it’s easy to see how lenders who are fast to fund can win favor among their dealers.
Lenders recognizing this competitive advantage immediately think “eContracting” — which is the perfect workflow with dealers who have also adopted eContracting in their F&I office. But that doesn’t address the rest of the dealers still “stuck” on paper contracting. For this group, which often represents the bulk of lenders’ indirect business, there are lenders already consistently processing their paper funding packages the same day they are received — and appear in the eyes of their dealers to book/fund “overnight.”
The good news is this process optimization can happen for lenders of any size, as long as they go about it the right way. Streamlining an in-house paper contract processing operation is not a task to be taken lightly, as there are many aspects of the operation vulnerable to risk when trying to consistently speed a fixed operation charged with managing a continually varying workload. Many lenders getting it right are utilizing the latest technologies and working with a partner that is a proven expert in the industry as their most effective way to alleviate the manual and time-consuming burdens of organizing, keying in and validating all that paper — and it’s how lenders can easily gain the efficiencies and funding speed that increase the likelihood of gaining more dealer business.
This eBook, The Lender Guide to Faster Paper Contract Processing, deconstructs the typical in-house process with objective scrutiny on areas to optimize, helping lenders evaluate the paths to upping efficiency and dealer service in the highly competitive indirect lending landscape.