Since the introduction of e-contracting years back, the technology has been touted as the next big thing to revolutionize automotive finance. However, the industry has been waiting to see its impact, with its adoption slow so far.

It’s been a rare situation where no one has wanted to be first out of the gate; dealers have been waiting for more lenders to implement it and lenders have been waiting on dealers. The fact that e-contracting changes the workflow and necessitates employee training also has been a deterrent. But things are finally looking up.

“E-contracting is really gaining momentum quickly,” says Alan Lehmann, vice president of finance solutions for DealerTrack. Both lenders and dealers are getting comfortable with the process, says Lehmann, who expects the momentum to build, especially as e-contracting becomes increasingly a part of dealers’ daily practice of delivering vehicles.

At ABC Nissan in Phoenix, the seventh largest Nissan store in the world, e-contracting is more than just a daily practice; it has become a “way of life,” as the dealership motto states. Jay Carley, Jr., executive manager, made it a mandatory practice when he saw the tremendous gains — financially and otherwise — it brought to the dealership. It took some effort at first, but the initial investment has paid off, resulting in millions of dollars more in the bank and a jump in CSI.

The Learning Curve

Any new technology implementation comes with growing pains. Nissan Motor Acceptance Corp. (NMAC), which was an early adopter of retail e-contracting and is now seeing a 36-percent penetration, has seen many dealers make the transition to electronic. Joe Bielinski, NMAC’s senior manager of contract processing, explains why dealers are tentative about making the leap.

“E-contracting changes the entire F&I workflow process in how we do business,” he says. “Some dealers have been doing it the same way for years and are reluctant to see changes in the workflow.”

However, once dealers try a few e-contracting deals and become comfortable with the process, they never look back, Bielinski says. The number of Nissan dealers using e-contracting was 509 in March 2007, up from 381 dealers in March 2006.

ABC Nissan also took some time to get comfortable with e-contracting before it was incorporated into the finance workflow. The dealership, which sells about 500 new and used vehicles monthly, started e-contracting last summer, but didn’t do more than 10 e-contracts a month for a few months. It was a big adjustment for the employees.

“It’s harder,” Carley says. “You have to spend more time with the customer, a little more one-on-one time because of how the contracts are signed. You have to be compliant on everything you do, and everything is fully disclosed.”

When Carley made e-contracting mandatory, particularly by altering F&I pay plans, the finance team had greater motivation to learn the system quickly.

“We changed their pay plans so that if they don’t e-contract or are under a certain percent of e-contracts, it can actually hurt their pay,” Carley explains.


ABC Nissan made all seven of its F&I offices e-contracting capable by equipping them with electronic signature pads. The dealership uses DealerTrack’s eContracting solution and ADP’s dealer management system.

Naturally, NMAC has also made enhancements on its end to handle the growing volume of e-contracts. It upgraded its technology to handle the faxes and ancillary documents that go back and forth before the loan is funded. The result is a “10-minute deal,” says Carley.

Now the dealership is doing up to as many as 200 e-contracts per month — 40 percent of all deals — and was even the top dealer in e-contracting with Nissan in January and February 2007.

E-Contracting’s Ripple Effect

An increasing number of dealerships are experiencing e-contracting’s main benefits: faster funding, increased cash flow, reduced re-contracting, improved compliance, increased CSI and the elimination of overnight shipping.

Beyond these gains in the finance department, Carley describes the positive ripple effect e-contracting has had throughout the dealership. As a result of the huge increase of cash in the bank, “right away the dealership is a lot healthier, which allows us to go out and buy more used cars, which, in turn, allows us to sell more used cars,” he says. Because the dealership can buy more used vehicles, it doesn’t have to sell as many trades, which helps the wholesale department since it doesn’t lose as much money wholesaling the vehicles.

“So it’s like a great circle of life that starts with e-contracting,” Carley says. “Now the store has done better in four other departments — used cars, new cars, accounting and wholesale.”

The impact in numerical terms is impressive. Before e-contracting, ABC Nissan was at about $1,750 per copy. Now it’s at over $2,000 per copy. Cash in the bank has gone up about $2.5 million.

Carley says that customer response to e-contracting has been very favorable. They can trust that they have been fully disclosed to and have signed on all the electronic dotted lines, and they never have to return for resigns. Plus, e-contracting has enabled ABC to cut down the time it takes customers to buy a car to just over one hour.

Word of Mouth Fuels Growth

Now that dealers have had some time to see e-contracting pay off, they are getting hooked.

“We have the word-of-mouth effect working for us” when it comes to e-contracting, says DealerTrack’s Lehmann. “There are a lot more conversations around e-contracting, and it’s really starting to move the product forward.”

Large dealers groups in particular have been catching on to e-contracting. Three national dealership groups — Sonic Automotive, Van Tuyl and the Suburban Collection — announced in February that they were implementing DealerTrack’s e-contracting solution. The Van Tuyl group decided to roll out e-contracting nationwide after testing it in a few of its dealerships.

“One store reduced its contract compliance issues by about 30 percent and had no returned contracts at all in a recent month, compared with its 9 percent return rate for paper contracts,” says Greg Oltman, director of finance for V.T. Inc.

These dealers say that e-contracting capability will be a key differentiator as they look for lenders to partner with in the future. DealerTrack has 23 lenders connected to its eContracting solution.