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ComplianceFinanceJanuary 27, 2022

eContracting helps auto lenders put the brakes on paper contracts for a better borrower experience

Paper financing contracts have long been the “Achilles’ heel” in the auto industry. Operational workflows, including loan origination, loan maintenance, ownership transfers, securitization, and collateralization, are typically manual, paper-based processes based on misperceptions of legal and banking requirements.

Yet, there are significant business benefits in moving to an online, electronic approach. Leading automotive financing companies have used eContracting to drive profits, streamline operational performance, and more importantly, meet borrower demand. To be successful, there are many facets to automotive eContracting you need to consider, including how to effectively manage and protect your digital documents while complying with all regulations and mandates.

Top five benefits of eContracting

In an increasingly connected world, borrowers expect the auto sales process to be quick and completely digital. Shifts in customer expectations and buying behaviors are here to stay. That fact has significant implications for auto lenders. In particular, bank and nonbank originators of auto loans need to reexamine and fine-tune the way they use eContracting to partner with dealers and better serve customers.

eContracting is a powerful tool that helps auto finance businesses meet borrower demand by removing the need for time-consuming paperwork to deliver significant benefits, including:

  1. Operational efficiency
    eContracting allows auto lenders to conduct transactions, process loans, and deliver documents faster than antiquated paper-based processes. While this might appear to be a qualitative benefit, streamlined processes that save time on each transaction – multiplied by hundreds or thousands of transactions – can add up to substantial cost savings and improved productivity.
  2. Compliance confidence
    A robust eContracting solution helps auto lenders meet the most stringent compliance requirements, including the secure management and proper retention of your eContracts. It is also critical to select a digital platform accepted and trusted by the lending ecosystem, including partner originators, lenders, custodians, and investors.
  3. Speed and capital efficiency
    Most borrowers and dealers love the convenience of receiving and responding to documents remotely from the comfort of their desktop, laptop, or mobile device. eContracting also provides benefits that extend beyond the sale of a vehicle. Digitizing this process frees up your capital much faster than using the traditional paper-based method driving greater capital efficiency.

  4. Reduced risk
    Many finance institutions face large financial risk, which an eContracting process can minimize. Key features of this include a compliant eSignature and eVault repository that meet the legal requirements to manage chattel documents in a wholly digital environment. Additionally, a best-in-class platform should provide greater confidence and transparency for lenders and investors as due diligence can be enhanced in a trusted digital environment.
  5. Improved sales metrics
    The customer satisfaction index (CSI) is vital to dealers and lenders in the automotive industry. Yet financial paperwork is a key part of the buying process, creating frustration with the transaction cycle and potentially driving customers away. Further attrition can occur when auto lenders reject a deal because of paperwork errors, forcing the customer to return to re-sign a deal. eContracting eliminates the possibility of these scenarios. In addition to elevating CSI, other intangible benefits include improved customer satisfaction and brand value, and increased employee or partner retention.

These benefits make eContracting well worth implementing, but not all solutions are created equal. To understand which solution will work best for your company, you need to know what a best-in-class eContracting solution should include.

Integrating a best-in-class eContracting solution into your digital lending processes

eContracting is often thought to be synonymous with e-signature. And while the functionality of e-signature is an important component, that is just the beginning of the eContracting value chain that includes the digital creation, validation, and execution of an automotive purchase contract. It is only after signing that the eContract has any value. Signed eContracts can be used to support loans under a warehouse line of credit or be pooled with other contracts and sold on the secondary market – ultimately freeing up capital for additional auto sales.

Signing and managing eContracts provides benefits beyond faster access to capital, especially for high-volume lenders. eContracting replaces the traditional, error-prone approach of paper-based, manual contracts with “wet” signatures and the time and money expenses associated with printing, faxing, mailing, and filing funding packages. As a result, eContracting greatly accelerates loan completion by ensuring all documents contain accurate data and are properly reviewed and signed by the appropriate parties. Post-funding, eContracting also simplifies and proves the validity of an eContract with automatic tracking and auditing of all actions related to the contract.

Summing it up

Auto lenders that want to digitize experiences to meet customer demands should seek solutions that transform the lending process end-to-end. In particular, look for a platform that enables eContracting. The good news is that eContracting is easier than ever to incorporate into your auto lending processes. An effective eContracting solution extends loan origination and dealer management systems for complete automation of the vehicle financing process. It should enable a lender to start digital and stay digital throughout the life of the loan.

Whatever uncertainty might lie ahead, auto lenders that embrace digitization, such as eContracting, will be ready to rapidly respond to any unforeseen market developments to remain competitive with dealers and borrowers.

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