How a flexible cloud LOS manages electric vehicle incentives

Lenders who want to capture business generated through government EV incentives can leverage loan origination technology to motivate customers — and close more deals

As the industry moves into 2022, incentives and rebates for electric vehicles (EV) are becoming more prominent in the market. Both federal and local governments now offer rebate programs that can reach up to $7,500 per purchase. This trend shows no sign of slowing, with some in Congress now proposing to increase the federal EV tax credit up to $12,500.

To make things even more complicated, there are separate incentives for commercial loans and consumer loans and leases. If a consumer who owns a small business purchases a vehicle through a commercial loan or lease, they can receive both the consumer and the commercial incentives, doubling their benefits. That’s a lot of motivation for the buyer, and a terrific sales opportunity, but it can be a burden for the lender to understand the process of these rebates.

So how do lenders tackle the dizzying array of incentives and rebates?

Financing providers should make sure their back-end systems can seamlessly manage this messy combination of ever-changing offerings. Without the ability to incorporate rebates and discount programs into their loan origination systems, they can very well lose deals to other providers that can quickly and easily apply rebates and discounts during the loan origination process.

The growth of commercial leasing in EV

Although fewer than 10% of U.S. vehicles are currently purchased through commercial loans and leases — and even fewer in Canada — the urgency to offer these types of lending products is accelerated by the increase in EV sales. Small business owners are now enticed into purchasing personal vehicles through their company brands to take advantage of rebate programs, with many customers choosing to purchase multiple vehicles to take even more advantage of federal tax credits.

Lenders will need to quickly adjust their programs to meet this changing demand. Those with more flexible and customizable loan origination system (LOS) solutions will be in a better position to capture a greater share of this business and will be able to do it on a more consistent basis. Cloud-based systems are particularly agile for these purposes and can be changed far more easily than a hard-coded, proprietary or on-premises infrastructure.

Solutions should be nimble enough to let lenders create new products like commercial leasing offerings within hours — not days or months — and without any intervention from the vendor. Revamping a hard-coded system is a major investment of both money and time. Significant in-house and IT resources are often required to alter an on-premises LOS system to accommodate a new workflow. Integration projects of this nature could cost upwards of $200,000 depending on how complicated or old the legacy IT environment is. Cloud-based LOS solutions mitigate this expense and allow lenders to create and launch new lending programs in a fraction of the time, compared with legacy systems.

Advertising incentives through a customized portal

Although incentives are becoming more ubiquitous, many consumers still aren’t well-versed enough on the extent of the benefits they can receive — or even how to go about taking advantage. Savvy dealers, OEM manufacturers and lenders can leverage customized portals to advertise these incentives to consumers and educate them on how to take advantage of these programs, providing up-to-date information.

Similarly, there’s a trend among banks to use customized messaging on portals to educate shoppers about incentives, even instructing them on how rebates can be used as down payments for electric vehicles. These banks maintain specific inventory information on vehicles from dealers, prequalify consumers for financing via their LOS platform, and pass those customers along to dealerships as warm leads. All of these capabilities are delivered through customizable, flexible lending technology.

EV-related federal tax incentives and government rebates are great news for the auto industry, consumers and the environment, but they also pose a challenge to lenders who must navigate an ever-changing landscape of programs and discounts. Cloud-based loan origination technology offers the most efficient and cost-effective solution to address the evolving dynamics. These solutions allow lenders to create and change programs on the fly, in most cases without external IT resources, to satisfy a growing market segment. EV incentives and discounts will only continue to become more pervasive — and likely complicated — over the next few years, and lenders need to make sure they have the architecture in place to meet this demand.

Bob Metodiev is head of business development at Inovatec Systems Corporation, which provides cloud-based loan origination and loan management solutions for automotive, power sports, equipment, and other lenders. 

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