Since the year 2000, the prognosticators have been saying it’s just a matter of time before econtracting will be adopted by F&I departments nationwide. More than a decade later, many important advances have been made, but industrywide adoption still appears to be at least a couple years away.
Will dealers be enjoying all the benefits of econtracting by 2016? It is difficult to say. As much as the electronic verification of finance and lease contracts, F&I products and title and registration documents seems logical, there are four key pieces that have to fall into place for econtracting to take hold nationwide:
- Universal high-speed Internet: For most econtracting processes, the dealer must connect with a third-party vendor. If their Internet speed is slow, dealers may find the process cumbersome enough to dissuade them from participating.
- Legislative reform: Finance and lease agreements are considered “financial instruments” by banks and finance companies, many of which securitize their contracts to fund their portfolios. The laws governing the interest earned by investors in those securitizations vary from state to state, and many were written before Al Gore discovered the Internet. The laws in several states would have to be updated for lenders to follow through on their plans to econtract.
- Availability: Once the path is cleared, lenders — as well as lending platforms, including Dealertrack and RouteOne — will have to provide the option to econtract on every deal.
- Acceptance: The final piece of the econtracting puzzle is you, the dealer body. Dealers must be ready to accept the change and have confidence that econtracting is better, faster and easier than multi-ply forms and antique impact printers.
The good news is that measurable progress has been made in each area. Most dealers now have high-speed DSL or broadband. Some have underinvested in their Internet service but most have the ability to upgrade. On the legislative front, all but a few states have proposed, if not enacted, new laws related to econtracting retail installment contracts and lease agreements. Generally speaking, issues stemming from the changes have been minimal.
Meanwhile, just in the past year, several captives have pushed their programs forward. Toyota Financial Services, Ford Motor Credit and Nissan Motor Acceptance have made significant progress in rolling out econtracting for their products. Most major aftermarket providers now offer econtracting through the Provider Exchange Network (PEN) and my company, F&I Express, or offer proprietary solutions through their own websites.
But the last and most critical factor is the dealers themselves. Are you ready for change?
Any new product or process has an adoption curve. When it comes to econtracting, you can put most dealers into one of three buckets. First you have the “hand-raisers,” who are open and looking for new tools and technology to speed up their processes. The second group is of the “steady Eddies” who are open to change but need some education and awareness before they will make the leap. I like to call the third group the “impact printer kings.” They love to hear the roar of the old printer and are resistant to change.
I believe our industry is ready for econtracting. There will be a transition period in which traditional processing will be mixed with electronic processing, and that has the potential to make things a little messy. But lenders and F&I product providers are interested in econtracting, and many are pushing for it.
Dealers who are willing to change their processes and procedures to accommodate econtracting will be rewarded. Full adoption will result in improved customer service, fewer errors in contracts, improved compliance and cost savings for you and your partners. If econtracting really is right around the corner, we will all be giving each other high fives by 2016.
Brian Reed is the president and CEO of Intersection Technologies Inc. and F&I Express. He is a 30-year industry veteran and an expert in dealership technology. [email protected]