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eContracting for BHPH Dealers

September 2008, F&I and Showroom - Feature

by Gregory Arroyo

When Larry Highbloom isn’t running Philadelphia-based VINtek, he’s helping states write legislation aimed at bringing their motor vehicle departments closer to a paperless lien and title system. We sat down with Highbloom to discuss what dealers need to know about electronic liens and titles and how such a system can affect their own eContracting initiatives.

SF: We’ve heard a lot about ELT in recent months. Can you give our readers an overview of the topic?

LH: ELT is similar to stock certificates. If you’re as old as I am, you can remember the days when you bought and sold stock and you’d get a piece of paper. 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 works the same way.

SF: Why should dealers be excited about ELT?

LH: If I bring my car in as a trade-in, and I have an existing loan outstanding with a lender, the dealer is going to need to pay off my lender. 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 costs the dealership time and money. 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.

SF: How can ELT benefit BHPH dealers in particular?

LH: Because ELT is paperless, it’s impossible to lose titles. That’s very important for a buy-here, pay-here store, 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 his car until he gets that title.

The second thing that ELT does for a dealer is create fewer errors. Let’s say Jack Jones Motorcars is the lienholder. The DMV may have recorded that as “J Jones Motorcars” or “Jack J Motorcars.” So Jack Jones gets a title, but it doesn’t correctly identify the lienholder. In this litigious society, if anything is wrong with that title, the recovery agent is going to say, “Sorry, not popping the car.”

Finally, ELT 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 BHPH 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.

SF: I would think that ELT also might help eliminate incorrect

or missing titles.

LH: Titling may not always be at the forefront of a BHPH dealer’s thoughts, but it is critical. It’s important that liens be recorded. ELT serves as the notification from the DMV to the lienholder — the dealer, in this case — and helps them spot what we call exceptions. The dealer won’t ever be in that situation where he or she looks through a stack of paperwork at the end of the day only to realize that five or six of the loans still don’t have titles. ELT allows the dealer to identify the exceptions sooner rather than later.

SF: Are there any negatives to the paperless system?

LH: The one negative with ELT is that because there’s no physical title, you can’t hand it to a customer who comes in with a shopping bag full of money. Instead, you have to tell the customer you can release the lien instantly, but it will take at least two or three days for the DMV to send the physical paper by mail.

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