VW Credit Inc., Volkswagen Group of America's captive finance company, wants its dealers to file consumer loan applications and submit signed agreements electronically, down to the last piece of paper.
VW finance arm pushes to go paperless
The lender, which has grown in recent years as Volkswagen and Audi sales have risen in the United States, will spend $30 million on information technology improvements over the next two years, CFO Christian Dahlheim said during an interview. One goal is to digitize every form that goes to VW Credit, starting this year for some dealers.
With the investment, VW Credit is joining the ranks of other captive finance companies -- including BMW Financial Services, Mercedes-Benz Financial Services and Ford Motor Credit Co. -- that envision car buyers signing their contracts on iPad tablet computers, no ink required. Fans of the technology say it will make the F&I process speedier and more professional and also cut down on errors in contracts.
"What we're trying to do is vastly improve the customer experience," Dahlheim told Automotive News. "We're big enough now that we can actually do it."
VW Credit, which finances Volkswagen and Audi vehicles, signed 404,947 contracts in 2012, up 28 percent. It ended the year with a record $23 billion in assets.
Five dealerships are trying the e-contracting system in a pilot project. VW Credit plans to release the software to dealers in some states by the end of 2013 and plans to have ink signatures eradicated "after 2014," Dahlheim said.
Signing the forms electronically may yield some savings, but that was not the impetus behind VW Credit's investment. The driver was the J.D. Power and Associates customer satisfaction survey, which shows that one of buyers' biggest pet peeves is waiting inside the F&I office and signing reams of paper.
"We do see efficiencies in that process," Dahlheim said of paperless contracting. "But that's not the driver. The driver is the customer experience."
Why go paperless?
VW Credit wants its dealers to start using e-contracting, in which signatures on a tablet can take the place of paperwork.
It could help the captive lender
• Review contracts more quickly and with fewer errors
• Improve customer satisfaction scores
• Use less labor reviewing paper documents
Open Dealer Exchange, a joint venture between ADP Dealer Services Inc. and Reynolds and Reynolds Co., is helping VW Credit go paperless.
Open Dealer Exchange, near Detroit, already has helped the captive arms of BMW and Mercedes-Benz with contract validation software, which electronically sends a contract to the finance company for review before the customer signs it.
When it comes to improving the customer experience in the F&I office, the biggest obstacle still is digitizing applications for titles and tags. The process varies widely from state to state, making it difficult to come up with a standard procedure, said Steve Luyckx, general manager of Open Dealer Exchange.
"It's a nightmare," he said.
Those forms have stymied other companies trying to digitize the car-buying process, such as AutoNation Inc., the largest U.S. dealership group.
"We were able to master every issue except title work," CEO Mike Jackson told Automotive News during an interview last year. "We can't. It's so Byzantine and bizarre that you can't do it centrally. The idiosyncrasies from legal entity to legal entity are mind-boggling."
He added: "We haven't been able to do it. And I gave up trying. I surrendered. And I don't give up easy."
Dahlheim says Volkswagen and Audi buyers also may need to sign loan applications on paper initially for legal reasons.
VW Credit's system will have a "backstop" to let dealers scan and submit any forms that customers must sign in ink.
VW Credit will not require Volkswagen and Audi dealers to use the new e-contracting software, at least for the time being. Plans for the rollout were discussed with dealers last month during the National Automobile Dealers Association convention in Orlando.
Dealers will choose whether to buy electronic signature pads, iPads and other needed equipment, Dahlheim said. VW Credit also says dealers will be able to continue using dealership management systems provided by both ADP and Reynolds and Reynolds because the new paperless contracting features will be integrated into software provided by both companies.
Brad Strong, a Salt Lake City dealer who owns Volkswagen and Audi stores with his brother, Blake, says he is considering doing more of the F&I process electronically to cut down on paperwork.
He used to keep all of his contracts in a storage room. When it ran out of space, Strong bought a used shipping container on the Internet and placed it behind one of the dealerships. It is a pain, he said, but the alternative also has risks.
"I'm still a little leery about storing all the papers," Strong said. "But it scares me a little bit, the idea of not having a hard copy. Computers crash, or they're not backed up right, or you're relying on an employee to scan both sides of a piece of paper."
Amy Wilson contributed to this report
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