In an increasingly digital world where auto dealerships, and their customers, seek the most efficient, error-free F&I process, the use of electronic contracts is growing, but they’re not yet the norm.
There are reasons for the hold up, industry experts say.
First, only some forms can be signed electronically, and dealers dislike going back and forth between paper and electronic forms during a deal.
“For dealers, it tends to be all or nothing,” said Steve Luyckx, president of Open Dealer Exchange, a joint venture between Reynolds and Reynolds and CDK Global that aims to automate and improve F&I functions within the dealership.
Still need paper
Jason Zahorik, sales planning manager for Toyota Financial Services, said that until e-contracting becomes universal in the industry, even dealers that have embraced it will still need paper in some situations.
“For example, if they don’t know if Toyota Financial Services or another lender will choose to finance [the loan], they may use paper because paper is accepted by everyone,” he said.
Lenders require a minimum of 10 forms, and dealers have half a dozen more, Luyckx said.
“Until you can electronically sign all of those forms, [e-contracting] is a partial solution,” he said. “Until you can transition entirely, e-contracting is not going to happen.”
And it takes years to convert forms to digital because no one group owns all of them. States, F&I product providers and lenders would each have to convert its forms.
“There are still states that have certain forms that require a wet-ink signature. The states have not kept up with where the dealers would like to be electronically,” said James Maguire, director of product marketing for CDK Global.
Resistance to change
It’s also a chicken-and-egg problem. Dealerships won’t start e-contracting if lenders and states don’t accept them, and lenders and states won’t launch the programs to accept e-contracts unless dealerships are using them.
“I think people are resistant to change. Dealerships are old dogs. It’s hard to teach them some new tricks,” said Rasheed Creary, business manager at Sutliff Volkswagen in Harrisburg, Pa.
“If you can get past that initial hump of money [for programs], it makes a lot of sense toward the bottom line,” Creary said. “Time is money as far as dealerships are concerned.”
But there have to be enough participating lenders to make dealers change their processes.
“Electronic is easier, but it’s a changing process,” said Brad Rogers, COO at Route One. If dealers can only use e-contracting for one or two lenders, “it might not be worth that change if they have to use paper for the rest.”
If dealers begin to request that their lenders accept e-contracts, they could push the industry along, Maguire said.
“Dealers are asking their lenders to accept documents electronically,” he said. “It’s clearly the way the world is going.”
No uniform process
For more adoption of e-contracting, there needs to be a uniform process that works for dealers, lenders, F&I product providers and the states alike.
Dealers may be waiting for an easier process among the states, specifically. Route One and CDK Global provide e-contracting in all 50 states now, but the growth came with hurdles.
“The vast majority [of states] had to be treated individually to make sure they met state laws,” said Dan Doman, chief legal and privacy officer for Route One.
Slight variations among providers’ programs can also be a headache for dealers and lenders, said Ron Greer, vice president of provider services at Open Dealer Exchange.
If a large dealership group “is working with 17 different banks and 12 different F&I product providers, it’s very difficult to for them to work with all these different integrations,” he said.