By Emil Banga, Senior Director of Product Management, Dealertrack F&I Solutions
Cashflow improvement, efficiency, and regulatory compliance are all good reasons to shift away from paper for dealerships. Automotive dealerships are embracing technology to streamline processes and meet the expectations of digital-savvy customers — resulting in a car buying experience that continues to evolve.
The paperless deal will soon become the new normal. However, while a growing number of dealers understand the benefits of going paperless, many may still have lingering questions that hold them back from going paperless.
So, let’s address some common questions, starting with the biggest: How much does going paperless affect a dealership’s bottom line? To tackle this one, here’s an example from a used car dealership with an average of 211 monthly contracts and a loan value of $18,109. With 3% floor plan rates, a cost of overnight shipping at $15, and the basic ancillary document preparation cost for traditional paper contract processing at $2; using digital contracting can cut their contracts in transit by $36,328. Additionally, the dealership’s annual income would increase by more than $57,099 as a result of reducing the contract in transit time by five days.
Another question dealers have is whether or not they can maintain regulatory compliance without the paper files they’re used to. Electronic signatures are legally binding, and digital contracting ensures contracts are complete and accurate before the customer signs and the dealer submits them to the lender. With the system flagging any potential issues, dealerships can have confidence that every contract is compliant with state and federal regulation. This level of accuracy also significantly reduces re-contracting, which means lenders can process contracts quickly, fund faster, and produce the improvements in their dealer customers’ cash flow mentioned earlier.
But is the information secure? Electronic transactions are encrypted and more secure than paper mailings since there is less risk of unauthorized personnel physically accessing customers’ personally identifiable information. Lenders can immediately acknowledge receipt of a funding package. And most important for compliance purposes, all paperwork and customer information are retained and securely stored—complete and available for audit when necessary.
Some dealerships are concerned their customers aren’t ready for a paperless car buying experience when it’s actually their customers who are driving much of the demand. Today’s car buyers have different shopping expectations than in the past. The convenience of internet shopping has shaped customer expectations for car buying toward digital and away from the stacks of paper that once concluded each deal. Car buyers want speed and efficiency. Negotiating and completing paperwork digitally (whether that’s online or in-store) can save up to 45 minutes, according to the 2018 Cox Automotive Emotional Connections Study.
Customers find electronic signatures more convenient and less intimidating than stacks of papers, which contributes to a more positive impression of your dealership and higher CSI scores (perhaps the biggest benefit of all).
So, as mentioned above, there are notable reasons to shift from paper processes to processes that support a digital deal, which ultimately improves the sales process for everyone involved.
For more on going paperless, join executives from Dealertrack for a panel discussion at Digital Dealer 27 (Aug. 19-21, 2019 in Las Vegas, NV) where they debunk misconceptions about the paperless deal and discuss how the transition from paper-heavy to paperless processes can be surprisingly painless.
About the Author
Joining Dealertrack in August 2007, Emil Banga began as a business analyst before moving into product management. He has utilized his skills in product innovation, business strategy, strategic roadmaps, and product development to reach his current role as Senior Director of Product Management for Dealertrack F&I solutions. In 2018, he was named a “40-Under-40 Industry Leader” by Auto Remarketing magazine. Before joining Cox Automotive and switching his focus to the automotive industry, Emil worked as a business analyst for American Home Mortgage and Global Home Loans. Emil holds a Bachelor of Business Administration and Management from Hofstra University.