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States Moving Closer to E-Contracting

July 2008, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

When Larry Highbloom isn't running his 17-year-old, Philadelphia-based company, he's helping states write legislation aimed at paving the way to the industry's e-contracting future. This month the president of VINtek talks about the spread of Electronic Lien and Title (ELT) among states, and how it fits into the e-contracting equation.

F&I: I've heard a lot about ELT in recent months. Can you tell our readers a little bit about it?

LH: ELT is very similar to stock certificates. If you're as old as I am, you can remember the days when you bought and sold stock that you'd get a piece of paper. It had all these pictures and numbers on it, and when you sold your shares you had to send it to your broker. Nowadays, you can buy and sell shares all day long over the Internet and you won’t get a single piece of paper. ELT is the same process, and it is between the DMV and the lien holder who receives the lien that is recorded by the dealer selling the vehicle.

F&I: So why should dealers be excited about ELT?

LH: If I bring my car in as a trade-in and have an existing auto loan outstanding with a lender, the dealer is going to need to pay off my lender. When he pays off that lender, the lender will release its lien. If the dealer's not in an ELT state, the lender will pull the title from its vault and mail it to the dealer. All that action takes time and costs the dealership money because it can’t sell the vehicle without the title. ELT benefits the dealer because he gets titles faster from the lender because it comes directly from the DMV. In fact, speed is so important to the dealers in the state of Massachusetts that they are trying to force all lenders to join the ELT program.

Another benefit is, since ELT is paperless, it's impossible to lose titles. This is very important for a buy-here-pay-here franchise, especially when it comes to delinquencies. In the old days, if you were looking for a paper title and it was missing, you had to run to the DMV to apply for a duplicate. A dealer can’t repossess the car until he gets that title.

ELT also eliminates the need for a storage room or a vault. Paper titles are like bonds. They're valuable. You have to keep them safe from fire and theft. If you have warehouse financing from a lender to operate a buy-here-pay-here operation, your lender may come in and audit your physical inventory to validate that you have liens. With paperless electronic archives, the lender can do audits remotely.

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