AutoTrader, DealerTrack partner to place indirect loans online
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NEW YORK -- AutoTrader.com and DealerTrack have formed a partnership to try and get dealerships more online finance deals.
"There's a tremendous amount of dissatisfaction out there," for both consumers and dealers, because consumers' online credit applications are poorly integrated -- or not integrated at all -- with the dealership F&I process, Chip Perry, CEO of Atlanta-based AutoTrader.com, said this month at an automotive forum here.
Today, consumers who arrange for their own financing online typically get a loan for a certain amount, not a specific vehicle. So about 80 percent of the time, AutoTrader.com estimates, those customers get "flipped" to an indirect loan at the dealership.
Customers often switch to the indirect, or dealership-arranged, loan because they can get factory incentives they couldn't get by working directly with a lender. They also switch after comparing the value of their trade-in against the specific cars a dealership has on its lot.
Meanwhile, dealerships are motivated to flip prime-risk customers to an indirect loan negotiated at the store so they can profit from the dealer reserve, the dealership markup on the customer's interest rate.
Instead of that inefficient process, AutoTrader.com and DealerTrack want to enable customers to get real-time, actual price quotes for specific cars from dealerships online, the companies say.
For example, DealerTrack says, it could route a credit application to a dealership's list of preferred lenders. Then the dealer could share an approval with the consumer, saying, "One of our lenders has conditionally approved your loan."
That so-called first pencil would serve as a basis for negotiations at the dealership. Not incidentally, it would make the online loan an indirect loan in which the dealership would profit from the dealer reserve.
"It is important to note that the dealer has full control as to what and how much data is shown to the consumer," said Lou Laste, a spokesman for AutoTrader.com.
AutoTrader.com expects to market-test first-pencil quotes for loans and leases later this year. A nationwide launch is expected for early 2013, the company said.
DealerTrack, of Lake Success, N.Y., has more than 1,000 auto lenders and about 17,000 U.S. dealers using its credit application network and other tools.
You can reach Jim Henry at autonews@crain.com.
