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Software & Technology

Is E-contracting Ready for Mainstream Use?

September 2005, F&I and Showroom - Feature

by Rebecca D. Chernek - Also by this author

Welcome to the remarkable business world of the 21st century! Rapid advances in technology are no longer limited to cameras, cell telephones and microwaves, and e-mail is the instant telegram of this era. Sophisticated software programs continue to change the way in which companies produce and file a wide variety of documents. While few dealerships have transitioned to a completely paperless office, the day is likely coming when we will accept this system as a fait accompli. The majority of dealers have taken the required steps to reach potential clients and conduct business through their Web sites. And now you have the opportunity to offer customers quicker car sales through the use of an electronic contract.

E-contracting is knocking at your door. Yes, e-contracting — a new online processing system for transmitting validated vehicle purchase contracts. Dealers and finance companies that endorse it quote a litany of benefits. Their mantra is: Faster and more accurate contracts at a lower cost. They also cite a limited paper trail, fewer re-contracts, reduced liability, decreased courier costs, minimized funding delays, reduced chargebacks due to errors in contract and product submission, increased customer satisfaction, reduced printing and distribution costs and greatly improved customer service. The list goes on and on, but do the accolades have merit? Is it worth the time and expense to set up the system sooner, rather than later? There are as many reasons to be cautious as there are to embrace the system.

How it Works

First, you need to have a basic understanding of how the system works. Simply stated, F&I mangers input the customer information and pertinent buying information into their DMS providers, such as ADP or Reynolds and Reynolds.

Once the sale is negotiated and disclosed, the F&I manager presents the e-contract to the customer, the customer reviews it for accuracy and signs the electronic retail installment contract via an e-pad. Once the e-pad has been signed, the manager submits the e-contract through the dealership’s designated platform; such as DealerTrack or RouteOne. This portal company verifies the signature, using digital certification, and then transfers the information to the bank source of choice from a list of participating institutions.

The bank source is provided with a creation of authenticity, a record of ownership and permission to have complete access to the records for comprehensive auditing and servicing capability. The portal company validates the structure of the transaction for specific bank guideline requirements, such as the correct term and interest rate, and the amount to finance based on advance, product options and potential errors in submission. The e-contract is not approved by this bank source unless all areas of the contract have been solidified. Within minutes, the customer’s loan contract is usually validated and the sale is finalized.

But what about liability concerns? Proponents say that liability on the part of the dealer is reduced significantly when utilizing e-contracting, e-signature and e-verification standards. In addition, they say it is almost impossible to alter a contract that has been electronically submitted and e-verified for signature authenticity by an AAA-rated insurance provider. “Almost” is an important word to keep in mind.

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