eContracting Enables Big Efficiency Gains for Auto Dealers


By Scott Hendriks

The adop­tion of eCon­tract­ing is gain­ing speed as auto­mo­tive deal­ers and lenders alike try to max­i­mize effi­ciency and mar­ket share in a fiercely com­pet­i­tive, tightly reg­u­lated market.

eCon­tract­ing can be a sig­nif­i­cant improve­ment over man­ual processes and send­ing infor­ma­tion by phone or fax because it greatly reduces the time needed – some­times to mere min­utes – for loans to be approved and funded. Tak­ing time and paper out of the process enhances cus­tomer sat­is­fac­tion, facil­i­tates faster receipt of deal pay­ments from lenders, and results in greater cost sav­ings and fewer errors.

How Does eCon­tract­ing Work?

eCon­tract­ing allows the dealer to sub­mit an elec­tron­i­cally signed con­tract to lenders. Finance and insur­ance (F&I) man­agers use a secure ePor­tal or a direct con­nec­tion from dealer man­age­ment sys­tems to gen­er­ate elec­tronic con­tracts. Using a sig­na­ture pad, buy­ers elec­tron­i­cally sign their doc­u­ments to a paper-free process. The ePor­tal soft­ware saves the sig­na­ture using dig­i­tal cer­ti­fi­ca­tion, inserts the image within the elec­tronic con­tract and then trans­fers this com­bined con­tent to a par­tic­i­pat­ing lender of choice.

eCon­tract­ing sys­tems use Elec­tronic Retail Install­ment Sale Con­tracts (ERISCs) instead of paper-based Retail Install­ment Sale Con­tracts, thereby enabling deal­ers to sub­mit an elec­tron­i­cally signed con­tract to a lender, trans­mit data seam­lessly and val­i­date con­tract cal­cu­la­tions. On the lender’s end, eCon­tract­ing can also pro­vide for the elec­tronic trans­fer and con­trol of con­tract own­er­ship for pool­ing and secu­ri­tiz­ing to ensure doc­u­ments are in order for future sale to investors.

Ben­e­fits for Both Lenders and Dealers

While the obvi­ous ben­e­fits of eCon­tract­ing for lenders include reduced time, labor and over­head, e-Contracting also pro­vides a com­pet­i­tive advan­tage by stream­lin­ing the fund­ing process and expe­dit­ing dealer compensation.

Lenders will reduce fraud risk due to the secure, elec­tronic nature of eCon­tract­ing and have new dig­i­tal audit trails that help with risk and process com­pli­ance as well as loan secu­ri­ti­za­tion. Addi­tion­ally, lenders will see an elim­i­na­tion of courier fees, reduced errors and sub­se­quent delays, and auto­mated enforce­ment of inter­nal poli­cies. Some have even been able to widen their geo­graphic foot­print since loans can be orig­i­nated almost anywhere.

Deal­ers are big win­ners, too. While it can take as long as a week for a deal to be funded with a paper-based con­tract, deal­ers are now real­iz­ing same– or next-day fund­ing with eCon­tracts. Wait­ing for con­tracts in tran­sit can be vir­tu­ally elim­i­nated, lead­ing to improved cash flow. Spend­ing less time in the F&I manager’s office after a com­pleted buy­ing deci­sion also min­i­mizes sales rescissions.

Deal­ers will see reduced costs for pur­chase and deliv­ery of pack­ages and improved cus­tomer sat­is­fac­tion due to deals that close more quickly, with fewer errors and with­out miss­ing infor­ma­tion. Addi­tion­ally, sig­nif­i­cant reduc­tion in data re-entry allows deal­ers to sat­isfy buyer options for another type of loan, new terms or error-free migra­tion from a pur­chase to a lease.

Because each step in the eCon­tract­ing process cre­ates an effi­cient lift and/or cost reduc­tion, deal­ers and lenders can share in a phased approach while real­iz­ing incre­men­tal returns.

Mov­ing Beyond Chicken-and-Egg

It’s time to move beyond the chicken-and-egg sit­u­a­tion impact­ing industry-wide adop­tion, wherein more deal­ers would adopt eCon­tract­ing if more lenders did, and vice versa. These days, a typ­i­cal buyer has almost zero tol­er­ance for fill­ing out paper credit appli­ca­tions and wait­ing hours for loan approval. Deal­ers and lenders that imple­ment eCon­tract­ing will enjoy a dis­tinct com­pet­i­tive advan­tage over those that do not.

Scott Hen­driks, Senior Prod­uct Con­sul­tant for Lend­ing Solu­tions at Fis­erv, can be con­tacted at