If you would have asked Jon Strawsburg 10 years ago when true e-contracting would come to auto retailing, “I would have said five years ago.”
OK, it took longer than he and many others in the industry thought. But the delayed train has pulled into the station.
“We really now have hit that inflection point,” Strawsburg, vice president-product planning at Reynolds & Reynolds, says of an e-contracting system the dealership information technology provider has launched.
It consummated its first digital car deal – including credit approval and the myriad mandatory documentation necessary to buy a car – with Mercedes-Benz Financial. It took seven minutes.
“The contract-in-transit time is reduced from days to same-day,” Strawsburg tells WardsAuto. “It takes the obstacles out of the different steps to finalize the deal.”
On the surface, it seems easy enough to develop such a system. But it required a lot of behind-the-scenes work (technological and otherwise) for an e-contract to take on the status of the authoritative document
“We had to build the system, then get the lenders on board and then it took about nine months for the attorneys to validate the process,” Strawsburg says. “It’s not just technology.”
Also involved in Reynolds’ e-contracting is Route One, an auto-lending aggregator with 1,400 lenders in its data base.
For a long time, e-contracting was considered an innovation of the future that always would be.
Some lenders had said they would go all in with e-contracting if dealers wanted it, but the lenders contended there was no real dealer demand for it. Conversely, some dealers had said they would use it, but lenders didn’t offer it.
So, who was dragging their feet?
“The answer is, probably both,” says Tom Schwartz, Reynolds’ communication director. “But many consumers were wondering, ‘Why am I doing all this paperwork?’”
Strawsburg agrees. “Consumers are tired of doing it the old way.”
He adds: “Lenders have had a sacrosanct process for years based on paper documentation. They have huge departments set up to put eyes on paper.
“Yet it’s clearly more efficient to do it electronically. They want to get there. An obstacle is that until they get there 100%, they still have to have these paper handlers. So it is difficult for them to say, ‘We are going to spend more money (on e-contracting technology) this year, but it will be some years before we can eliminate that other expense.’ That’s a significant hurdle.”
He also notes that when the financial crisis of 10 years ago hit, “banks hunkered down and stopped investing substantially in IT.”
That’s changed, and Strawsburg contends lenders will become the main beneficiaries when e-contracting becomes prevalent in the dealership world.
“If you look at the economics of it, the lenders are the bigger winners,” he says. “The dealers see some efficiency, but the lenders no longer would have someone to book that loan up front, do the input, exam it, get it into their system and authenticate it.”