|If you’re running a Fortune 100 enterprise, you’re probably not staying awake at night worrying about your month-to-month cash flow. However, if you’re like the rest of us, cash flow is a constant concern. For auto dealers, improved cash flow is one of the primary benefits of electronic contracting—right up there with higher CSIs, reduced costs for overnight shipping of documents and the practical elimination of returned contracts due to simple mistakes such as missing signatures.|
Unlike traditional ink-on-paper documents, electronic contracts travel at nearly the speed of light. Since they move so quickly, they can be reviewed and approved faster. For dealers, the additional speed translates into faster funding. The sooner the funds hit your account, the less interest you wind up paying, meaning you’ve got the cash in hand to spend on other necessities, such as staffing and marketing.
Before the advent of e-contracting, it could take anywhere from 10 to 20 days to move a loan through the steps of application, approval and funding. Today, technology exists that greatly reduces the time dealers must spend waiting for funds. With electronic contracting, a dealer can send in a contract in the morning and receive approval and funding that same afternoon.
Electronic contracting represents a quantum leap forward in business technology for dealers and offers business efficiencies that were impossible to achieve just a few years ago. In addition to dramatically decreasing the number of contracts-in-transit and days to fund, e-contracting reduces shipping bills significantly. It also helps ensure that all signatures are accounted for and that the contract is correct.
One of the key features only available with e-contracting is an electronic verification option, which gives the financing source an opportunity to review the final terms of the contract before the consumer actually starts signing. The exact amount financed, all the supporting math and additional details about the transaction are checked to be certain they’re within agreed-upon parameters. Once the contract is verified, the dealer can proceed with the contracting process and collect all required signatures from the customer using an electronic signature pad.
It is difficult to make a mistake on a contract using a system like this because everything is verified. It checks and double-checks all the information, saving dealers the time and hassle of sending incorrect contracts back and forth trying to get everything right.
Even minor problems with a contract, such as missing signatures, often require customers to return to the dealership, which creates a CSI headache for everyone involved in the sale.
Recontracting is more than just inconvenient for auto dealers and a hassle for your staff; recontracting can seriously harm your top-line revenue and bottom-line profits. One of the major business challenges of recontracting is that it creates opportunities for customers to reconsider their purchases of aftermarket products such as insurance and warranties. Recontracting can expose $500 or more of your back-end profit per deal to unnecessary risk.
Customers also appreciate the speed and efficiency of electronic contracting. For many, e-contracting is a breath of fresh air—a sign that the retail automotive business isn’t stuck in the Stone Age. Customers are already used to seeing this type of technology whenever they go shopping at most retail stores. E-contracting makes most customers feel more comfortable and helps drive up CSI scores by eliminating last-minute misunderstandings. With electronic contracting, there’s no mystery or confusion. The customer sees everything and then signs the pad, so it’s extremely straightforward.
If you’re not utilizing electronic contracting, you’re subjecting your contracts to avoidable risk—delays in funding and potential recontracting both of which cost you money.
Auto retail veteran and F&I products expert Paul McCarthy has joined AUL Corp. as vice president of national sales.