Making the Auto Lending Process Better One Deal at a Time

Many Americans are overwhelmed by the car buying process, especially if financing. According to Experian’s “State of the Automotive Finance Market Q1 2022,” average loan amounts 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 can’t properly 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 the documents needed for the deal, 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 rely on fuzzy faxes or non-secure emails to the seller’s personal mobile phone.

Financing a Car Doesn’t shouldn’t start with a Painful Lending Process

“Proof of income,” is one of the most required and time consuming documents to obtain. Consumers look for their most recent paystub, W2 or bank statement. In most cases, this unnecessary step causes friction right from the start of the process. And it’s uncomfortable for the buyer since salary discussions are quite personal. Informed lenders usually skip this step since they have access to reams of salary data.

Informed pulls a reliable salary estimate from IRS and Bureau of Labor and Statistics data, removing the need for 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.

A Real World Example

We recently came across an application from a FedEx worker we will call Joe. Joe stated his annual salary was $45,000 per year. Informed’s result 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 the paystub documents to verify the stated salary. 

The dealer sent over the documents (next day), informed calculated income, confirmed the paystub wasn’t fraudulent and verified Joe’s income. It turned out Joe’s actual income is $51,757.97 including his overtime pay, based on the lender’s policies. This qualified him for a better loan rate or a better car. But since it was after “normal business hours” for the dealer, Joe didn’t know that his paystub had been accepted. 

Our data shows that 41% of consumers unknowingly actually understate their income. This slow and awkward process isn’t necessary. Informed decreased a 3-day customer journey to seconds without needing additional documentation. A multi-touch hassle became a seamless transaction with no added risk or compliance concerns. And both the dealer and consumer enjoyed a better experience. Informed’s platform bypassed the need for consumer documents and can triple the capture rate within this segment. 

When it’s necessary to collect documents to verify income, dealers don’t have the right tools to return clear copies. So the process grinds to a halt. On average it’s 14 days for contracts in transit, but often closer to 30 days. During which the buyer and dealer are left in the dark during the delay in the dealer being 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.” Lender-requested documents are immediately viewable, putting the buyer one step closer to their new car, and the dealer closer to getting paid.

Informed’s Auto Lenders see a 77% reduction in manual reviews of deal jackets and decreased funding times by 7 days.  The system increases capture rates, dealer satisfaction and customer satisfaction – a win/win/win. Contact us today and to see how.

As Featured in American Banker

X