Making the Auto Lending Process Better One Deal at a Time

Many Americans are overwhelmed by the process of buying a car, especially if they need financing. According to Experian’s “State of the Automotive Finance Market Q1 2022,” average loan amounts have increased YoY from 4.61% last year to 11.74% bringing them up to an average of $4,155 in 2022.

Still, it shouldn’t be complicated: A consumer walks into a dealership looking to buy a car. And, the dealer wants to sell that consumer a car – simple. Except, historically car buyers are confused by ancillary products, exhausted from negotiating and drowned in paperwork and document requests. Compounding that, most car dealers aren’t set up to collect those documents and often, a consumer shopping for a car doesn’t bring all of their sensitive documents with them. So starts the chase.

The dealer (hopefully tells the consumer all of the needed documents to get the deal done, though that could change further into the buying journey) and the consumer scrambles to pull them together and get them back to the dealer.  Often they’re relying on fuzzy faxes or non-secure emails to the seller’s personal mobile phone.

Financing a Car Doesn’t have to start with a Painful Lending Process

“Proof of income,” is one of the most required and time consuming documents to obtain, as the consumer goes to look for their most recent paystub, W2 or bank statement. In most cases, this is an unnecessary step that causes friction right from the start of the process. And it can be uncomfortable for the buyer since salary discussions tend to be quite personal. Informed lenders can usually skip this step since they have access to reams of salary data. Informed can pull a reliable salary estimate from IRS and Bureau of Labor and Statistics data, removing the need to collect the buyer’s paystub. In many cases, Informed returns a more reliable result, since there can be overtime pay, commissions or tips that aren’t reflected on that one recent paystub.

We recently came across an application from a FedEx worker we will call Joe. Joe stated that his annual salary was $45,000 per year. Informed returned a result that indicated that a FedEx worker in Joe’s zip code would make close to a median income of $47,000 per year which is inline with Joe’s statement. So that lender didn’t actually need to ask for paystub documents to verify the stated salary. 

Once the dealer sent the documents to the lender (a day later at 9 pm) informed calculated income, confirmed the paystub was not fraudulent and verified that Joe’s actual income is $51,757.97 when including his overtime pay, based on the lender’s policies, which could have qualified him for a better loan rate or a better car. But since it was after “normal business hours” for the dealer, Joe had no idea that his paystub had been accepted. 

Our data shows that 41% of consumers unknowingly actually understate their income; This slow and awkward process didn’t even have to happen. Informed took a customer journey that originally spanned 3 business days and decreased it to seconds without needing to ask the customer for additional documentation. This turned a multi touch experience into a seamless transaction with no added risk or compliance concerns and a better dealer and consumer experience. Utilizing Informed’s platform to bypass the need for consumer documents can triple the capture rate within this segment. 

When it is necessary to collect documents to verify income, dealers simply don’t have the right tools to easily return clear copies of documents and data back to the lender. So the process grinds to a halt, on average 14 days for contracts in transit, but often it is closer to 30 days, with the buyer and dealer left in the dark and a delay in the dealer’s ability to get funded.

There is a Better Way

Informed enables dealers to send a secure text message to the buyer requesting the required documents. The buyer simply clicks the link, takes a photo of the documents and uploads it, with real- time receipt. The result is a clear image sent through a compliant channel that is faster, better and easier for both parties. And this is a more transparent process – no 14 day “black box.” Documents are requested and viewable immediately by the lender, putting the buyer one step closer to their new car, and the dealer closer to getting paid for that car.

Auto Lenders who use Informed see a 77% reduction in manual reviews of deal jackets and their funding times are decreased by 7 days.  The system increases capture rates, dealer satisfaction and customer satisfaction – a win/win/win. Contact us today and we’ll show you how.

As Featured in American Banker