Electronic contracting has become increasingly prevalent in auto retail, but it still has room to improve, especially as an enabler to the fully online vehicle transaction. Many automakers, lenders, dealerships and vendors are boosting their e-contracting efforts to prepare for the online evolution.
F&I product providers have latched onto e-contracting in a big way. Ninety percent of them e-contract, said Carl Ciaramitaro, managing director for Provider Exchange Network.
More than 50 F&I product providers offer e-contracting services via MaximTrak, which was recently acquired by RouteOne. "The majority of the product providers that have gone e-contracting are seeing the lion's share of their business e-contracted," said Jim Maxim, MaximTrak president and RouteOne's chief digital officer.
Lenders have been slower to take up e-contracting, but RouteOne and Dealertrack said they are making progress adding lenders to their e-contracting platforms.
RouteOne has 30 auto lenders so far and plans to have most of the top 50 within the next year. Dealertrack has 22 lenders signed onto its platform, and the number of dealerships that actively e-contract with Dealertrack grew 20 percent from 2015 to 2016.
RouteOne's dealership clients consistently ask for more lenders on the e-contracting network, said Todd Mason, RouteOne's chief strategy officer. There's a tipping point where the networks have the right number of dealerships and finance sources. E-contracting is getting to the point where there's critical mass on the dealer side, he said.
E-contracting is more challenging on the financing side than on the F&I product side because of a higher degree of regulatory scrutiny. Still, the financing side has made great strides.
"Everybody is moving in that direction," said Jon Strawsburg, vice president of product planning at Reynolds and Reynolds. "We're seeing the manifestation of all that work we have done in the past coming to bear now. The lenders are telling us "I'm getting hit from 10 different directions'" from vendors and dealerships that want e-contracting.
Automakers' captives are among the financing companies that have mounted a full-court press on e-contracting.
Nissan Motor Acceptance Corp. began e-contracting in 2004. Now 80 percent of Nissan dealerships e-contract, and the captive's e-contracting penetration was 62 percent for the fiscal year. The company runs various promotions to get dealers on board, President Mark Kaczynski said. "We encourage them to e-contract. There are a variety of incentives to them, but in certain circumstances it is more difficult to e-contract," he said, so the company remains flexible in terms of taking paper contracts.
Ford Motor Credit Co. began an e-contracting pilot in 2006. "It was customer demand," said Bill Whitlock, vice president of brand management. "We certainly saw customers that were doing things online even back then. There are a ton of benefits in terms of the dealer and lender. We started with that in mind, satisfying a customer need and satisfying the dealer."
Today the majority of Ford Credit's contracts are done electronically, he said.