|Retail Automotive eContracting Summary|
Captive and non-captive finance companies have independently developed verification and validation criteria for the credit application and the retail installment sales contract and lease agreement. One objective of eContracting is to speed the processing of the credit application approval and funding of the contract by incorporating the lender’s checking
process as a consumer’s credit application is created in the dealership’s finance department.eContract Process
There are several methods of initiating the eContracting process. They include electronically exchanging documents with the lender and even the manual entry of the data while using the lender’s computer application (when data is not sent from the dealership F&I application). When the process involves an electronic credit application the lender may provide one or more of the following alternatives:
- Complete the application without electronic validation and the finalized contract is subsequently printed in the dealership,
- Create an electronic credit application with validation and the finalized contract is printed in the dealership, or
- Provide a complete eContracting process with electronic credit application and contract including digitizal signatures (incorporating security certificates).
- The dealer provides the consumer with a printed copy of the contract including the required Truth In Lending Act (Regulation Z) disclosures before the contract is executed.
- If the consumer enters into the contract with the dealer, the dealer retains a digital copy and provides the customer with a printed copy of the signed contract.
Supplemental information or stipulations may be required for the credit application (depending on the transaction type, the lender’s underwriting criteria, federal and state regulatory requirements, and the applicant’s credit qualification level). Additional documents required to supplement the retail installment contract may include proof of income, address verification, an odometer statement, DMV registration and, if purchased, an extended warranty agreement.
An eContract, along with the approved credit application, and the necessary supplemental documents could be linked in a digital sales contract folder and stored in a document archiving system. Copies of the required documents would be printed in the dealership for the customer. With eContracting dealers would need to have reliable, scalable e-vaulting if they choose to store digital copies of the documents required for the deal jacket. Such storage must also comply with the records retention requirements contained in Regulation B of the Federal Equal Credit Opportunity Act and any additional state-specific or lender-imposed retention requirements.
To ensure an optimal customer experience dealers would continue to manage the process in the dealership and seek to minimize the time required of the customer to complete the credit application and finalize the sales contract. Completing the checking process of the contract terms while finalizing the credit application could reduce the error incidence in subsequent contract review by up to 30% for some lenders.
Overall benefits may include a positive customer experience, increased confidence that the contract will be funded, less time required to complete the sale, and it enables the OEM to recognize the vehicle sale/lease sooner. With validation of the data performed in the dealership, many potential contract errors are resolved with the customer prior to finalizing the application thus increasing the likelihood that the lender will fund the contract. The checking process may be incorporated in the dealership F&I system, a third party service provider who links dealers with the finance companies, or directly by lenders if they provide a link for the dealers.
Other benefits include a savings in time and effort by personnel processing application and eliminating the mailing of the documents between the dealers and the lenders. A significant benefit would be the successful completion of the lender’s credit application checking process and validation of related contract information prior to forwarding the credit application to the lender for approval. The validation step ensures all data required for the lender’s contract will be available when it is completed and forwarded to the lender for approval.
The four steps generally describing the eContract process are summarized in the following paragraphs.
Create an eContract – once the contract terms are finalized and structure of the loan/lease developed with the customer, the F&I system (or DMS that includes F&I functionality) transfers the contract-related information to the eContract application.
Verify the contract’s content - eContracting process would verify the lender’s contract-related data requirements as the credit application is submitted to identify errors and facilitate their correction prior to presenting the customer with the contract.
Review – following successful verification (errors no longer detected) in the credit application or the contract, the contract is printed for customer’s review and signature.
Fund – the funding process is the final step. Submit the finalized contract (printed or digitally signed) and receive funding from the lender.
EContracting Vendor Questions
A page titled, eContracting Vendor Questions, supplements the summary description of eContracting with a series of general questions that may benefit dealers when evaluating vendors who offer electronic contracting solutions for their dealerships.