Auto dealers embrace digital tools, lender hesitation remains 

Auto lenders must continue to improve digital contracting and financing processes as more dealers digitalize online and in-store operations.  

Dealers have leaned in on online financing tools, according to a survey of 100 dealers conducted by AI-driven lending platform Upstart. The survey found that 43% of respondents indicated they could provide their services entirely online. About 55% of dealer respondents said they offer instant pre-approval online. 

“We’re seeing something like 90% of dealerships now using some form of digitized processes,” Alex Rouse, vice president and general manager of auto at Upstart, told Auto Finance News. “It will become the new normal, and the expectation will be that lenders are going to have to provide a digital contracting experience.” 

Improving experiences 

Broader use of AI and digital applications allows dealers to reduce costs and detect fraud, with many dealers also employing AI-based operations to provide faster, more organized in-store experiences for consumers, Jessica Gonzalez, vice president of customer success, lending at Informed.IQ, told AFN. 

Lenders with experience using AI for back-end services such as fraud detection are exploring new uses for the tech to improve dealer management and satisfaction, Gonzalez said. 

At the same time, more dealerships have adopted digital tools to improve in-store purchasing experiences, from helping consumers find the vehicle they want to financing, Upstart’s Rouse said.  

“We’re seeing more interest from manufacturers who want their dealerships to provide the best-in-class [experiences] in the store,” he said. 

AI hesitation 

While dealers and manufacturers are leaning in on digital, many lenders have yet to digitalize the entire financing journey. A January Informed.IQ survey indicated that 44% of the 2,500 respondents, mostly lenders, had not incorporated AI into their lending due to hesitation from C-suite executives. 

“You don’t want to be the first one [to try AI], especially in a highly regulated industry like banking or lending,” Gonzalez told AFN. “But now we’ve seen a couple of the top lenders utilize AI. They were able to tap their friends on the shoulder and say, ‘Hey, this is what I did, and this is the success I experienced.’” 

The lack of digitalization and use of AI in lending has led to problems for dealers, which according to Upstart’s survey lead to: 

• Delayed or canceled funding due to contractual issues; 
• Issues with obtaining and submitting stipulations to the lender; and 
• The need to rehash deals with lenders 

Surveys distributed by both Informed and Upstart indicate that lenders will need to use digital tools and experiences to provide the best, most relevant consumer experience alongside dealers.  

“The biggest part of it is thinking about how [AI] can and has improved accuracy and customer experience,” Gonzalez said. “[Lenders] have already implemented [AI] for detecting fraud and utilizing it in cost savings. Now they’re putting it more in the areas where it can be upfront and help with dealer satisfaction and it makes a whole lot of sense.” 

— Additional reporting by Amanda Harris

Registration is now available for the annual Auto Finance Summit East 2024, May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Visit AutoFinance.Live to learn more.