By Todd Hutto, Associate VP Operations, Dealertrack Digital Document Services
Even as more of the car buying process moves online and the desire for a digitally connected online-to-instore experience grows stronger, many dealerships continue to contract on paper. These contracts and their entire funding packages require lenders to complete extensive handling and manual data entry 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 cashflow that helps them stay profitable — and can help that lender ultimately earn more business.
Lenders recognizing the importance of this competitive advantage immediately think “eContracting” — which is the perfect workflow for 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, thus appearing in the eyes of their dealers to book/fund “overnight.”
eContracting isn’t the only way to become a fast-funding hero. Lenders can further optimize their funding speed by making use of features like auto-decisioning with nuanced if/then rules, single sign-on technology, application pre-fill and digital stip submission. How much of a difference can this make? Well, 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% 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—whether through eContracting, automated decisioning, or a combination of the two—can win favor among their dealers while easing the process for underwriters and ensuring better accuracy.
The good news is this process optimization can happen for lenders of any size, as long as they approach it the right way. Streamlining an in-house paper contract processing operation and automating a manual underwriting method are not tasks to be taken lightly. Many aspects of the operation can be vulnerable to risk when trying to consistently improve the speed of a fixed operation charged with managing a continually varying workload. They are opposite goals.
Many lenders getting it right are utilizing the latest loan origination systems (LOS) and working with a partner that is a proven expert in the industry. This is the most effective path to alleviating the manual and time-consuming burdens of organizing, keying in data and validating the loan package. It’s also the fastest way for lenders to easily improve efficiencies and funding speed, therefore increasing the likelihood of gaining more dealer business.