The industrywide effort to speed the F&I process is making strides due to a stronger focus on technology, according to results of the 2015 Non-prime Automotive Financing Survey.
The time between lenders’ receipt of loan applications to lenders’ first decision dropped to 39.8 minutes in 2014, a 16 percent, or 7.6-minute, decline from 2013.
“Automation and technology should continue to decrease first response times,” Dwayne Furmidge, director of the Americas for Benchmark Consulting International, the firm that conducted the survey, told Automotive News in an email. “The cost of automation previously reserved for large finance sources has become more available and cost effective for the medium and small finance source segment.”
The survey, conducted each spring for the prior year, is sponsored by the American Financial Services Association and the National Automotive Finance Association. The survey began in 1996.
The latest survey looked at data from 45 finance sources, representing 1.8 million active accounts. In 2013, the survey was made up of data from 22 finance sources and 1.2 million active accounts. Nearly half of respondents in the latest survey were repeats from 2013.
Because of the broader sample in 2014, numbers are not completely apples to apples, Furmidge said. But the trends reflect a quicker loan approval process.
The number of manual credit decisions loan officers made per day also increased in 2014, rising to 34.8 decisions, from 32.1 in 2013. Manual credit decisions have risen during the past few years. In 2012, loan officers made 29.9 credit decisions daily, and in 2011 they made 28.6.
Technology saves time
F&I process time “is trending down because of improvements in technology and focus on dealerships trying to optimize every avenue they have,” said Jack Tracey, executive director of the National Automotive Finance Association.
Finance companies know dealers want to accelerate the F&I process, and they want to be to the go-to lender for that business, he said.
“Each finance company views [technology] as a competitive edge as they can improve the turnaround time,” Tracey said.
Technology is also more available to small and medium lenders.
“Large budget lenders have had this for a while,” Furmidge said. “Now small lenders have it.”
Automated credit decisions have become so common that manual decisions are becoming the exception, used when a decision is pending or when the decision isn’t simple or routine, Tracey said.
“The smaller companies are more likely to be auto-decisioning the rejections [but] aren’t as apt to be using the auto approval end of the system as the larger companies are,” Tracey said. “But they’re trending toward it. Eventually smaller company numbers will be able to mirror larger companies as far as rejections and approvals.”
The trend will continue with a joint effort between dealerships and lenders, Furmidge said.
Technology “will continue to decrease time and continue to improve efficiencies overall,” he said.
Emphasis on verification
The average number of contracts funding auditors booked per day was 4.6 in 2014, compared with 4.5 in 2013. Those numbers were half what they were in 2012, when auditors booked an average of 8.97 contracts per day.
Furmidge and Tracey see this as a positive. It means auditors are doing a better job verifying, they said.
“Verification has become more and more prevalent as risk continues to increase. We see now from subprime perspective, where a funder would fund eight to nine contracts, the industry has improved by placing a lot more emphasis on verification,” Furmidge said.
Auditors will continue to fund four to five contracts daily.
“That’s going to be the expected range moving forward because of the need for extended verification,” he said.
Finance companies have also begun to use various data sources, such as credit bureaus that provide alternative information, such as a consumer’s utility payment and rent bill history.
Tracey said: “Since [those bureaus] are in the marketplace providing data, decisions can be made quicker.”