You might think getting a sale is the biggest hurdle when selling luxury products like RVs, powersports vehicles, or marine vehicles. But securing a customers’ buy-in is often the easiest part of the sales process.
It’s the next step — getting the deal funded — where many sales lose profitability due to the inefficient and outdated consumer lending practices many dealers and their lender partners have. Specifically when businesses continue to use traditional paper-based systems in our tech-oriented world.
Customers want to own the vehicle of their dreams, dealerships want to sell their inventory, and lenders want to finance these deals. Having an inefficient, disjointed consumer lending process means both dealers and lenders risk losing revenue.
Why Is Manual Lending Problematic?
Traditionally, consumer lending is an arduous task that involves manual data collection, a labor-intensive review of applications, and frequent errors and delays. The whole process heavily depends on how accurate data is and how efficiently it’s transferred between departments.
Any issues at any step can delay the process by days or even weeks. Some of the biggest flaws in the manual consumer lending process include:
- Customers must physically give the dealership all necessary documents (driver’s license, paystubs, proof of residence, and more) to even start the process.
- Completion depends on the customer, lender, and dealership submitting documents and data entries on time and without errors.
- Staying in compliance requires dealers and lenders to use the latest forms for loan transactions, which can change based on the specific lender, year, or state.
- Manually reviewing credit worthiness of normal financial applications takes the same amount of time as abnormal ones that require further action when identified.
- Time spent meeting with a customer and reviewing their application for the dealer and lender is wasted when a customer is deemed ineligible for a loan.
- Lack of synchronization between separate businesses and department due to different systems or distance creates extra labor and increases risk.
- Manual lending requires multiple steps where both the dealer and loan officer must input data by hand, leaving room for data re-entry and errors.
Overall, paper-based lending is a tedious process that takes up a significant amount of time, labor, and money to process a customer’s financial application — not to mention the expenses wasted on deals that fall through. But how do you overcome these problems?
The Best Financial Institutions Are Going Digital
In 2022, McKinsey & Company released data that showed top performers in the financial service sector had banking revenue growth over 30% compared to the 5% growth of average performers. Interestingly, these same top performers had over 90% end-to-end digital ecosystems, while average performers only had 30-35%.
By embracing more technology, these top performers were able to improve their operational excellence and see an increase in their profitability. This has caused a growing divergence between top and bottom performers, where the cost of not embracing technology means falling behind competitors.
In fact, just under 60% of consumers are even willing to pay more for specific pieces of a sale if it’s offered online. This includes services like reviewing and selecting F&I products or being able to easily sign all paperwork online. Adopting new technologies will streamline your lending process and increase profits, whether you’re a dealer or a lender.
The Automation Advantage
With automated lending workflows, you can streamline credit analyses or loan approvals. On top of that, automation can help reduce the labor burdens of forms management and deliver a better customer experience.
For example, one dealer solutions consultant at Volkswagen Credit explained the benefits eContracting had on their lending process. In fact, eContracting dropped their document and funding package processing time to a third of the time as paper while cutting out 23% of their package reworks.
Automation lets dealers and lenders digitize forms management to fill out the right documents more quickly and accurately than manual lending. This virtually eliminates human error and decreases recontracting rates.
Lending workflow solutions, like AppOne, use automation to make processing loans more efficient and less risky for both dealers and lenders. Some other benefits of automation include:
- Offering customers a quick and easy way to submit their financial applications at their own pace without having to go back to the dealership repeatedly.
- Reducing the time spent reviewing credit applications while improving accuracy in determining an applicant’s eligibility.
- Staying in compliance by using a forms management system that provides the correct forms.
- Creating a centralized network of data between the dealership and lenders so customer information remains consistent and accurate.
- Lowering the amount of contracts in transit so everyone is paid faster, giving dealers and lenders time to focus on more important tasks, like locking in the next big deal.
Overall, manual lending is a time-consuming, labor-intensive, and disjointed process that wastes resources and is fraught with human error. But with digitization and automation, dealerships and lenders can save time, resources, profits, and build better customer relationships.
Whether you’re a dealer or a lender now is the time to automate the lending process and make your business more profitable and more competitive.