Dealerships kept contracts digital in Q2 despite CDK Global outage, Wolters Kluwer says

Auto dealerships sent lenders more digital contracts during the second quarter, opting against paper documentation despite the challenge of the CDK Global outage in June.

E-contracting grew 29 percent year over year during the second quarter and rose 3 percent compared with the first quarter, according to the Wolters Kluwer auto finance digital transformation index. The e-contracting support company did not release specific figures.

Digital contracts increased even though a large piece of the auto retail industry lost their dealership management system during the second quarter. CDK Global shut down its software as a precautionary measure after two cyberattacks June 19. It began bringing dealerships back online June 29 and said most customers were back online as of July 2.

"I really thought [losing CDK] would be an impact," Tim Yalich, head of auto strategy at Wolters Kluwer, told Automotive News. "I didn't see it."

Social media posts suggested dealers would be returning to paper and handwritten contracts, Yalich said. But the industry found alternatives and kept doing business digitally, demonstrating its strength and resiliency, he said.

"I really enjoyed seeing the results speak to that," he said.

Yalich said the quarter-over-quarter e-contracting results might have been a "subtle" point or two higher without the outage, but the CDK issue didn't hold back the industry from posting a significantly higher digitization adoption rate during the second quarter.

"I don't think it would have looked that much different, if nothing happened to CDK, honestly," he said. "Those transactions found other ways to get executed digitally."

The CDK outage taught the industry "you need to have a Plan B" and a disaster recovery plan, Yalich said.

"This is kind of like the pandemic," he said. Dealerships found a different way of doing business during COVID-19, too, he said.

The e-contracting rate was up 165 percent from the second quarter of 2020, according to Wolters Kluwer.

"That speaks also to the fact that everything's going to a digital medium," Yalich said.

Yalich said he thinks dealerships will be more prepared the next time they lose a key tool.

The first quarter typically shows a rise in e-contracting because of the volume of deals during what Yalich calls the "selling season" of early spring and tax refunds. Digitization then typically flattens in the second quarter, Yalich said. This happened again in 2024, he said.

"That screams loudly to the fact that we're stabilizing and digital is the norm," he said.