April 29, 2019

Where Do I E-Sign?

Lenders and dealers are steadily increasing adoption of electronic contracting for auto loans and leases to cut costs and improve efficiencies at dealerships. But e-contracting's next step — remote and e-signing, where customers handle contracts and signatures outside a dealership — has more hurdles to overcome.

In late 2017, a Toyota dealership working through Toyota Financial Services and RouteOne was first to complete a remote electronic customer signature on a finance contract.

"We want to ensure that remote e-contracting retains the proper controls and validations that exist with traditional e-contracting," Jessi Miller, sales planning national manager for Toyota Financial Services, said in a statement to Automotive News.

Still, Toyota Financial says it sees growth for remote e-contracting and is studying how to best deploy the feature.

RouteOne has about eight lenders that allow consumers to sign e-contracts remotely.

Less than 800 dealerships are signed up to do so, but that figure has nearly doubled over the past seven months as interest has spiked, said Jeff Belanger, senior vice president of business development for RouteOne.

Belanger thinks rising interest rates and floorplanning costs, combined with continued margin compression has helped e-contracting grow.

"Dealers are looking for every place they can to save some money, and e-contracting's a great place to do that," he said.

Growth in e-contracting also comes as technology continues to advance. Through e-contracting, lenders fund loans faster and dealers save on shipping fees they would have spent to mail lenders the loan documents. Lenders and dealers also like e-contracting because it ensures all signatures are collected.

The number of lenders integrated into RouteOne's e-contracting platform has more than doubled in two years, growing to 70 as of late March, compared with 30 in early 2017. The suburban Detroit e-contracting company also has 8,000 dealerships enrolled to conduct e-contracting, up from 6,300 in July 2017.

RouteOne says the number of dealerships that use e-contracting daily jumped 45 percent in 2018 compared with the previous year.

And 2.4 million e-contracts were booked through RouteOne last year, up about 11 percent from 2017 and 20 percent from 2016.

Dealertrack, another company that launched e-contracting in 2002, has more than 20 lenders that e-contract including captive finance companies, banks and credit unions.

Dealerships' use of e-contracting has grown 80 percent since 2015, Dealertrack says.

"With more and more consumers looking for a simple and fluid experience, dealers really value the ability to fund quickly, accurately and easily," Cheryl Miller, general manager of Dealertrack F&I Solutions, said in a statement to Automotive News.

In the last five years, Dealertrack says, it has experienced a 65 percent bump in contracts moving from paper to electronic formats.

For some dealerships, such as Jim Koons Automotive Cos., a Virginia-based group with 16 rooftops, the shipping savings from e-contracting are substantial.

"Our costs for mailing out the contracts has been more than cut in half," said Karen Vance, director of finance and insurance operations at Jim Koons, adding that some stores had spent $1,000 a month in shipping contracts.

Vance said RouteOne's e-contracting system has streamlined its processes.

It's integrated with the Reynolds & Reynolds dealership management system and works with the tabletop finance and insurance DocuPad system.

In January, 57 percent of Koons' contracts were done electronically, the highest level since it began e-contracting in 2013, Vance said.

Vance hopes RouteOne will add more lenders and allow dealers to reassign contracts to another lender through e-contracting, something it now has to do via paper.

E-contracting saves F&I staff time at Koons, especially after a customer signs. Koons ranks No. 14 on Automotive News' list of the Top 150 dealerships in the U.S.

"They literally could be neat and complete and over to the lender and funded the same day without ever getting up from their desk," Vance said. "It is really slick."

Lenders on Board?

But converting dealerships to e-contracting can be a challenge if some lenders don't offer it.

Ron Redfern, general manager of Sellers Subaru near Detroit, said his dealership over the past few months has focused more on e-contracting with Subaru Motors Finance — run by Chase Auto — after switching DMS providers.

But the dealership's other lender partners are smaller banks and credit unions that don't have e-contracting.

"It seems like a lot of the smaller places are a little slower to get on board," he said.

Redfern said his goal is 100 percent e-contracting, as funding time is cut to two days from up to two weeks in some cases, plus it cuts down on paper and errors. Now about 46 percent of new and used auto loans and leases are done electronically, he said.

His business managers are still learning the Dealertrack system and working out kinks. With customers waiting, "to keep the train rolling" sometimes F&I staff opt to do a paper contract instead, said Kyle Torkler, a business manager at the dealership.


Toyota Financial Services, which uses RouteOne for e-contracting, says it experienced high utilization growth for a few years after launching e-contracting in 2012. Now 87 percent of contracts purchased by Toyota Financial are e-contracts.

At the beginning of 2019, nearly 1,300 Toyota and Lexus dealerships assigned an e-contract to Toyota Financial, Toyota's credit arm. The number of participating dealerships is up 1 percent from 2017.

Volvo Car Financial Services launched e-contracting in 2016 for loans and has 121 dealerships eligible for e-contracting, but just a small portion of dealerships use it now, said TJ Prayner, vice president of sales and marketing for Volvo's finance arm.

"Over the past few years, e-contracting was buzzworthy throughout the industry. However, our retailers said it disrupted the sales process and was inefficient," Prayner said in an email to Automotive News. "When you marry [Volvo Car Financial Services'] ability to fund [paper] applications the same day and e-contracting's disruption to the sales process, our retailers lean toward the traditional funding process."

Volvo's captive, which uses Dealertrack for e-contracts, said it wants to transition its lease transactions into e-contracting and sees more potential in widespread adoption of e-contracting when the availability of remote signing increases.

"We see a tremendous amount of growth with e-contracting in the coming years as e-sign capabilities increase, the technology becomes more efficient and consumers become more confident with it," Prayner said.

Still, rapid growth in remote e-contracting may take time.

"I think what we've seen in a lot of cases is utilization of that product is relatively niche or you might have a dealership that's very progressive in how they choose to engage with their consumers, their customers, so they take advantage of it," Belanger said. "But I think dealerships as a whole are still trying to get comfortable with how to incorporate that into their closing process with the consumer."


-Previously printed in Automotive News by Melissa Burden on April 8th, 2019. You can reach Melissa at mburden@crain.com.