Electronic signatures gaining momentum

The coronavirus pandemic sped up dealerships' use of new technology, online tools and digital processes to sell vehicles.

Now, nearly a year after the COVID-19 illness reshaped the way Americans buy nearly everything, auto retailers across the country hope the pandemic-sparked e-commerce rush will eliminate the need for wet ink.

State franchised dealer associations have been working with state motor vehicle agencies and lobbying legislatures for years in a bid to allow electronic signatures, particularly on title and registration forms. Leaders of those dealer groups say those efforts have accelerated or remain a top priority given the pandemic.

They now have a path to success to follow. Florida, as an example, authorized electronic signatures on vehicle transactions through dealerships in March 2020 as the coronavirus started to spread in the U.S. Some dealerships in the state subsequently have been processing sales without the buyer ever having to put pen to paper, said Ted Smith, president of the Florida Automobile Dealers Association.

"The pandemic immediately brought what I've been asking for for two years," Smith told Automotive News. "Digital deals are in place in Florida for the future."

Other states have also eased restrictions around wet signatures — for instance, a Texas Department of Motor Vehicles spokesman said the state allows digital signatures. But it's still unclear how widespread the shift has been across the country, and whether dealerships that can use electronic signatures to finish deals are actually doing so.

More breakthroughs could be on the way this year.

In New Jersey, lawmakers are considering a bill to require the state's motor vehicle agency to accept all vehicle purchase paperwork that has been electronically signed. California's new-vehicle dealers association likely will try again this year to get legislation passed that would digitize signatures on sales and lease contracts that now require wet ink.

For dealers, the progress is long overdue.

"This is something that should have happened a long time ago," said Larry Zinn, general manager of Warren Henry Auto Group in Florida.

"You should be able to buy a car without having wet signatures," he said. "It's a more convenient customer experience. You know, it is touchless, which is what our consumers want."

Auto retailing has long been viewed as slower to adapt to e-commerce than other retail sectors. But the industry's digital transition was underway before the pandemic as dealerships worked to improve the customer experience and become more convenient and efficient. Retailers and vendors vary in how they define an end-to-end online purchase — but in any case, requiring a customer to physically sign a paper form prior to taking the keys generally precludes a transaction from being considered 100 percent digital.

But going digital, down to every signature in a deal jacket, would pay dividends for dealers and consumers, advocates say. Some likely benefits: cutting down on paper, speeding up transaction time, getting deals funded faster and improving customer satisfaction.

"We have shifted to electronic signatures in most departments across my four Nissan stores," said Scott Smith, president of Smith Automotive Group near Atlanta. "The storage and security of paperwork associated with wet-signature documents is a major cost. A high-volume store can have 3,000 customers in the service center a month. Each visit requires three or four pages to be signed by the customer. You check a lot of boxes with electronic signatures."

Despite the benefits, not every state accepts digitally signed documents. Thirty-five states have laws to enable electronic signatures specific to title and registration paperwork on the books, and 26 of those have taken the next step to adopt policies governing how to accept them, according to Cox Automotive's Dealertrack unit, which monitors states' electronic titling and registration regulations.

Documents that must be physically signed often include an odometer disclosure statement or a secure power of attorney form.

The goal is to get more states to authorize electronic signatures during the titling and registration process, said Sarah Hunsicker, director of government affairs at Dealertrack Registration and Title Solutions.

Enacting legislation to enable e-signatures is the first step, she said. Developing specific policies for motor vehicle agencies to accept electronic signatures can be more complex, requiring resources and procedures to authenticate a customer's identity and securely store records.

"I do believe that this year holds a ton of promise," Hunsicker said. "COVID has been an accelerator."

In Florida, the state Department of Highway Safety and Motor Vehicles last March began accepting electronic signatures on several forms, including title applications and odometer disclosure statements, according to a notice the department issued that month.

A spokeswoman for Florida's motor vehicle department told Automotive News via email that no wet ink is required for customers at franchised dealerships today, so long as the retailer complies with specific requirements. Electronic signatures are optional, not required, she said.

Some Florida dealerships have taken advantage of the new system.

Brian Kramer, general manager of Germain Toyota of Naples, said his store made the switch in March. Electronic signatures are now the default, Kramer said. Customers leave with deal documents saved on flash drives; those who want paper copies must request them.

The dealership spent several months digitizing its internal processes and working with vendors to set up a secure process to electronically submit title and registration documents. Kramer said he removed several dealership printers to discourage the use of paper documents. Germain Toyota even advertises its paperless process.

Customers generally hadn't brought up electronic signatures until the dealership began to collect them, Kramer said, "and then they said, 'Wow, it's about time.' "

"It's been transformational for us," he added.

Regulations governing electronic signatures generally are left to states. An existing federal law offers a framework, and a model nationwide law written about two decades ago — the Uniform Electronic Transactions Act — was left to states to adopt, though they could modify the language.

California, for instance, exempted conditional sale and lease auto contracts from its version of the uniform law and requires them to be signed with wet ink. Brian Maas, president of the California New Car Dealers Association, said his group likely will pursue a bill this year to change that. Two previous efforts were unsuccessful.

Maas said the association also is urging the state to move faster to adopt an electronic odometer signature policy.

In "California, the home of Silicon Valley, we should be able to figure out a way to balance the need for appropriate consumer disclosure and a more efficient sales process," Maas said.

Hunsicker said it's now possible for all 50 states to accept electronic odometer signatures, though not all do. In 2015, the federal government passed a transportation funding package that included language allowing states to adopt electronic-signature processes for odometer statements, but it took until 2019 for NHTSA to develop a final rule that states could follow.

Some states opted to wait for that rule to develop a policy rather than risk not complying with NHTSA's requirements, Hunsicker said.

The New Jersey General Assembly in January unanimously approved a bill that would authorize online vehicle sales and prohibit the New Jersey Motor Vehicle Commission from rejecting vehicle purchase paperwork for being digitally signed. The bill is pending in a state Senate committee.

The commission does not comment on pending legislation, spokesman William Connolly said via email. He added that the state's vehicle transaction requirements "were set up to prevent fraud in used-vehicle sales, especially online, which is a persistent problem. We are in the process of reviewing the proposed changes and assessing the impact on customers and fraud prevention."

Physical signatures are required when the fraud risk is high, Connolly said. The commission did not waive that during the pandemic.

Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, is urging his state to move quickly. When state restrictions shut down showrooms early in the pandemic, he said, dealers had to quickly develop the ability to sell vehicles online and remotely if they were to sell vehicles at all.

"The COVID situation kind of shed a white-hot light on some of the regulatory obstacles to remote sales," including wet-signature laws, Appleton said.

"We're moving legislation now on the assumption that someday we'll be out of this COVID emergency situation," he added. "Sooner or later, this will pass, and we'll be looking to essentially incorporate the lessons learned during COVID so that we can meet our customers where they are, when they are and how they want to be met. And a growing number of them want to transact business online."

Urvaksh Karkaria and Richard Truett contributed to this report.