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Industry trudges toward e-contracts

NEW ORLEANS -- While e-contracting speeds auto deals in the long run, it can slow them in the short run while auto lenders and dealerships learn to use the technology. And that has contributed to a slow rate of adoption.

"E-contracting is great, as long as the lenders are up to snuff," NADA Vice Chairman Bill Fox told audience members at the American Financial Services Association Vehicle Finance Conference here last month. "But we need money in the bank. If I have trouble -- whether it's my fault or the lender's fault -- I'm going to go where I'm going to get paid for the car," said Fox, a partner in Fox Dealerships Inc., which sells eight brands at five stores in and around Auburn, N.Y.

Lenders on another conference panel criticized dealerships for being slow to adopt new technologies.

"Dealers are slow to embrace technology; that's been their M.O. for years," said GM Financial CEO Dan Berce. Once dealers come around, he said, technologies once cutting edge become routine, such as online portals at dealerships.

Berce and other auto lender CEOs were asked what one thing they would most like to see improved in lender-dealer relationships. "Just a better spirit of embracing technology -- that and [embracing] change, that would be great," Berce said.

Mike Groff, CEO of Toyota Financial Services, said lenders share the blame. "Anything new is always slower," he said. "There's always a learning curve. All of us, us included, are comfortable with the way we do things. Once dealers get comfortable with it, once your own people get comfortable with it, it gets smooth."

The industry has made attempts at e-contracting since at least the 1990s. Lenders like it because it cuts the time it takes to fix mistakes that often get made writing contracts by hand, such as missing signatures or customer information that isn't consistent throughout the document. E-contracting also makes it easier to document that disclosures required by state and federal laws were made.

As a first step to e-contracting, several lenders have adopted electronic validation of contracts. VW Credit CEO Andrew Stuart said contract validation accounted for 31 percent of VW Credit's volume in December for Volkswagen and Audi.

Without e-validation, he said, 20 to 25 percent of contracts must be traded back and forth with dealerships to get everything exactly right.

Groff said it was a priority last year for Toyota Financial Services to implement e-contracting. He said by the end of 2013 more than 50 percent of the company's volume was being contracted electronically.

Software supplier RouteOne reported its e-contracting system handled 700,000 e-contracts in 2013, up 300 percent from 2012. Its e-contracting clients include Ford Motor Credit Co., Toyota Financial Services, Bank of America and SunTrust Banks. More auto lenders are signed up to introduce e-contracting in 2014, RouteOne said.

Groff said the move to e-contracting is important now: "At a time when compliance is a huge deal, the ability to fix it while it's being done is a step forward" for efficiency and for customer satisfaction.

You can reach Jim Henry at

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