Consumers want a car-purchase process that is seamless, streamlined and limits their in-dealership transaction time to an hour or less.
That means allowing consumers to compare interest rates, electronically sign credit applications and other documents and shop for finance and insurance products all on a dealership’s website before stepping foot into the dealership.
OK, so the industry isn’t completely there yet — but some financial technology is.
That was the general consensus of financial industry experts, technology providers and other big thinkers, who gathered for Used Car Week in Scottsdale, Ariz., Nov. 12-16.
“We’ve defined the problem quite well; consumers want the information; they want a fast transaction; they want to have it all arranged before they get into the dealership, but I don’t think we’ve totally solved for that,” said Andrew Stuart, president and CEO at TD Auto Finance, during a sideline interview at the conference.
In its search for solutions, TD Auto Finance has been in talks with a number of financial technology startups and struck a deal to become a preferred lender with AutoGravity, a digital vehicle-shopping and financing platform, Stuart said.
“As lenders we’re going to have to make a number of small bets with some of these fintechs that are trying to solve for what consumers want,” he said.
“There are a lot of companies nibbling around the edges trying to figure it out. With enough attention and focus it will get solved.”
Also seeking solutions is Cox Automotive.
Take consumer credit applications, for example.
Andy Mayers, Cox Automotive lender solutions strategist, said credit application information is typically gathered from consumers and then entered into dealership computers by dealership F&I managers.
But credit applications submitted on dealers’ websites by consumers using Cox Automotive’s Accelerate digital retailing platform saves time, even if it would have taken an employee just five minutes to enter the information, he contends.
“If you sell 100 cars a month, that’s 500 minutes you just saved by having a consumer enter that data,” Mayers said, during an interview.
“It’s incremental. For an F&I manager, for a dealer, time is money. The more they’re doing administrative things, the less time they are selling.”
Mayers also said dealers are open to giving consumers more information about F&I products online, but worry that F&I sales, a major profit source for dealers, will suffer and consumers will miss out on valuable products.
“If you talk to dealers, some are afraid that consumers will opt out of buying things, such as service contracts and (guaranteed asset protection) products,” Mayers said. “Service contracts can be a valuable tool for a consumer to cover their expenses for costly maintenance.”
To bridge the consumer’s online and in-dealership experience, Cox Automotive’s Dealertrack created uniFI, a dealer-facing software platform that integrates with Accelerate, Mayers said.
As an open platform, uniFI can facilitate the entire car-buying journey of credit, contracts and aftermarket sales, he said.
Though much of the vehicle purchase process, such as trade-in appraisal, test drives and vehicle registration and titling paperwork, are typically conducted at a dealership, “technology is getting there,” when it comes to allowing consumers to do it themselves online, Mayers added.
F&I on dealers’ website
Tammy Linkfield, senior vice president, central region, at Ally Financial, said consumers shop, research and gather information about vehicle purchases online, but “at the end of the day they come back to the traditional automotive dealer.”
“We continue to work with dealers and helping them to have a spot for F&I on their websites and things of that nature to improve that experience,” said Linkfield during the panel discussion: “Auto Fin Executive Roundtable: The Next Steps for the Industry.”
Also on that panel was Jim Money, president of Automotive Finance Corp., who said taking advantage of things such as artificial intelligence and mobile apps “take the mundane out of the process” and help streamline the wholesale vehicle buying and selling for dealers.
“Mobile technology is extremely important,” he said. “It allows the dealer to buy and sell (used vehicles) and pay down and gather information on their accounts.
“Dealers are looking for ways to source their inventory. There are traditional brick-and-mortar (auctions), but virtual lanes are becoming much more important.”
Fintech’s impact is 'dramatic'
Fintech was a hot topic among auto finance executives during a panel discussion that honored them as leading Women in Auto Finance.
Katherine Adkins, Toyota Financial Services group vice president, general counsel and secretary, said fintech is dramatically changing auto finance.
She said companies that don’t adapt and grow risk being among the “Kodaks of the world,” referencing the once-dominate camera company’s near-death experience resulting from its failure to switch its photographic technology from film and paper to digital.
Adkins also cautioned that financial technology is way ahead of regulation, which could eventually present problems.
“The rules aren’t written yet and the business wants to go there. So how do you facilitate them going there without setting up a situation where you end up hurting yourselves?” she said.
More technology, more legal and compliance issues
Panelist Sharon Mancero, senior vice president, Wells Fargo Preferred Capital, predicts that technology will be at the forefront of career opportunities available in auto finance, but agreed that more technology will create more legal and compliance issues.
“The more we lead with technology, the more we go ‘ooh, nobody ever thought about; what do we do with all this data?’ she said.
“It’s all consumer data. There are privacy and regulatory issues. Where do you store it? How do you use it? When not to use it? Legal and regulatory is a big area that we need to continue to pay a lot of attention to.”
Georgine Muntz, board of directors member, defi SOLUTIONS, a provider of loan origination software, said the industry is being challenged by a lack of agility and outdated technology.
She said when an online used-car retailer such as Carvana — which allows consumers to find, finance and arrange delivery of a used vehicle online without stepping into a dealership — can be created and go public “faster than a traditional lender can change out a core system, you have to think there is a problem.”
The industry must become nimble and take advantage of the new technologies for payments and electronic documents, said Muntz, who was also a Women in Auto Finance panelist.
“These are the things we have to take a hard look at and find ways through legal and compliance to allow for these changes to happen,” she added.