Today's leading auto retailers widely recognize the significance of digital deal jackets in their operations. The comprehensive electronic records have transformed legacy dealership processes, covering all aspects of vehicle sales. However, just utilizing a digital deal jacket isn’t enough, especially since only 20% of dealers said they utilize a digital copy of a person’s driver’s license – even with a digital deal jacket. 

The Federal Trade Commission's Safeguards Rule has brought these security concerns to the forefront of the industry. The rule mandates stricter information security protections for consumers, requiring auto dealerships to implement robust measures to safeguard customer data. 

Security Remains Critical

At the heart of the security imperative lies the protection of sensitive customer information contained within digital deal jackets. The records house a wealth of personal data, including names, addresses, Social Security numbers, financial details, and even copies of driver’s licenses. Some industry reports cite auto thieves now breaking into dealerships looking to steal paper files instead of the cars themselves. Digital deal jackets, with much higher security protection, would make it increasingly difficult for those thieves.

One of the key challenges facing dealerships is the modernization of their data collection and storage practices, particularly concerning driver's license information. A recent industry survey revealed that only 19% of dealers collect digital copies of licenses, with an alarming percentage still relying on outdated methods, such as photocopying. That highlights the urgent need for dealerships to adopt more secure and efficient digital processes that comply with the new regulatory requirements.

Better Integration Needed

However, while a growing number of dealers are now incorporating digital deal jackets into their operations, there are a number of best practices needed to ensure the full integration of all components of the consumer's journey, from information gathering to transaction completion. The incomplete digital transformation presents both challenges and opportunities for the industry.

One of the primary areas for best practices is in the handling of credit applications, financial information, and verification documentation, such as driver's licenses. Despite the move toward digital deal jackets, those components are often still managed through inefficient, paper-driven processes or transmitted in unsecured ways. That disconnect not only slows the sales process but also introduces unnecessary security risks.

When customers provide critical documents to the dealer, the documents are frequently handed over in paper form or sent through unsecured digital channels. While dealers eventually scan the documents for inclusion in the digital deal jacket, the initial collection and processing of the information remain a weak link in the digital chain. The fragmented approach undermines the efficiency gains promised by digital systems and exposes sensitive customer data to potential security breaches.

The ideal scenario involves a fully integrated, secure system that captures and processes all customer information digitally from the outset. That would include secure online portals for customers to upload verification documents, integrated credit-application systems that feed directly into the digital deal jacket, and encrypted channels for transmitting financial information. Such a system would not only enhance security but also dramatically improve the efficiency of the entire sales process.

Why The Trend Is Alarming

That is why it’s a missing ingredient today. Did you know that 42% of dealers using digital deal jackets say they either never include a digital copy of the customer’s driver’s license in the deal jacket, or only very few times, or only some of the time.

Also, only 6.5% of dealers say they have automated the process of digitally scanning a customer’s driver’s license and then having it automatically placed in the digital deal jacket. Furthermore, scanning of the driver’s license is important, but dealers must also utilize verification technology to validate the driver’s license and the person’s true identity. That additional step helps to validate and verify the individual via address verification, red-flag checks, the Office of Foreign Assets Control, motor vehicle department lists, and synthetic fraud checks.

Dealers must leverage full integration to reap the true benefits of a digital deal jacket.

A fully integrated digital system would allow for better data analytics and customer insights. By having all customer interactions and documentation in a unified digital format, dealerships can leverage advanced analytics tools to gain deeper insights into customer preferences, streamline their sales processes, and offer more personalized services.

Digital deal jackets, when properly secured, offer benefits including quick access to documents, improved data accuracy, faster resolution of customer disputes, and enhanced communication within the dealership. Moreover, the use of standardized and secure digital processes conveys professionalism and attention to detail, enhancing the dealership's reputation and instilling confidence in customers.

What’s more, the benefits go even further. In the past, dealerships would generate approximately 39 feet of paper per deal copy, leading to overwhelming storage requirements and inefficient document-retrieval processes. 

With digital deal jackets, dealerships can centralize all critical documents related to a car deal without the need for physical storage. The centralization not only saves space but also significantly reduces the cost associated with document storage, in addition to greater compliance. Consider that storing paper documents for just 100 deals a month can cost dealerships more than $6,300 over the required seven-year retention period. 

Efficiency is also among the most compelling arguments for digital deal jackets. In a traditional setup, searching for a single document could be a painstaking process, often involving rifling through numerous physical folders.

As the automotive industry continues to evolve, with trends like online car buying and subscription models gaining traction, having a robust, fully integrated digital infrastructure will be imperative for dealerships to adapt and thrive. Digital deal jackets, when properly integrated with all aspects of the sales process, can serve as the foundation for the new business models.

Ken Hill is managing director for 700Credit, a provider of credit reports, compliance, soft-pull and fraud-prevention products. 

EDITOR’S NOTE: This article was authored and edited according to F&I and Showroom editorial standards and style. Opinions expressed may not reflect that of the publication.

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