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E-signing is changing the auto contract

We’ve all done it at one point in our adult lives. No, not that. We’re referring to e-signing of course, the type of signature that now holds the same legal standing as a handwritten signature. Now, the level of security that electronic signatures bring to the table indeed does vary. Technically speaking, a qualified e-signature is one implemented through, and verified by a digital certificate. Said certificate has typically been encrypted through a signature-creating device which needs to be authenticated by a qualified trust service provider. Sounds rather layered, right?

A qualified trust service provider is a government approved entity that abides by strict guidelines, providing a valid time and date per signature (the act of signing). Nearly every major industry today has an e-signing component worked in, but some are much more advanced than others. Auto lenders and dealers are no strangers to e-signing, but they are looking to ramp up industry wide adoption with the end objective of cutting costs and improving efficiencies at U.S. wide dealerships

Back in 2017, a dealership working in conjunction with Toyota Financial Services and RouteOne was the very first dealership to complete remote e-signing on a finance contract. This was big for the auto world and while remote e-contracting is indeed cheaper and more agile, Toyota themselves have had doubts and continue to monitor the process carefully. Today, Toyota (via their partner agency, RouteOne) employs eight lenders who facilitate e-contracts remotely. But at an industry level the overall number is still quite low.

Figures vary, but the estimates are less than 800 dealerships across the U.S. equipped to manage e-contracts. However, that figure is growing and financial stress via rising interest rates and typical brick and mortar expenses is helping e-contracting to expand. Dealers are consistently pressured to improve margins not just in regard to sales but overall operations. As one analyst went on record, “dealers are looking for every place they can to save some money, and e-contracting’s a great place to do that.”

At a practical level, e-contracting enables folks to process loans at a speed previously unimaginable. To peak your imagination, RouteOne has been so successful that 2.4 million e-contracts alone were booked last year, up 11 percent from 2017 and 20 percent from 2016. A Virginia based dealership group reported savings of $1,000 per month alone in shipping costs. Despite these savings and the ease however, there still exist a significant amount of dealers who prefer the old-fashioned route. In fact, many say it interrupts an otherwise, highly personal sales process and could have a negative effect on how the customer views the entire car-buying process.

Like anything we think the tech side will eventually win out. The question now is simply when.

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