E-contracting volume grows 29% year over year

The volume of auto loans originated digitally increased during the second quarter despite relatively flat auto sales that were caused in part by cyberattacks on dealership software provider CDK Global in June. Electronic originations grew 3% sequentially and 29% year over year to about 2.7 million contracts in Q2, according to software provider Wolters Kluwer ’s Q2 2024 Automotive Finance Digital Transformation Index. [caption id="attachment_58343282" align="alignnone" width="630"] Wolters Kluwer[/caption] The index usually plateaus in the second quarter as the first-quarter boost from tax refund season wears off, Tim Yalich , head of automotive strategy for Wolters Kluwer, told Auto Finance News . Factoring in the cyberattacks on CDK , which slowed sales toward the end of Q2, the expectation was that the index might dip, but it did the opposite, he said. "What that signifies is that we hit new highs, or the bar has reset, as far as what normal looks like with digital lending,” Yalich said. Digital auto loan volume in securitization markets decreased 41% sequentially, aligned with seasonality trends, but rose 39% YoY, according to the index . The growth in the number of digital loans in the securitized market speaks to what's happening on the origination side, Yalich said. . An uptick in digital loans translates to additional loans securitized by those who execute digitally, he said. “It speaks to the health of the industry. . There's a lot of trust in how loans are originated digitally,” he said. CDK outage prompts e-contracting switch Wolters Kluwer expected the CDK incident to negatively impact e-contracting, Yalich said. . For more than 15,000 dealerships nationwide, the cyberattacks took dealer management systems (DMS) offline for two weeks . . Franchise dealers make up most of the e-contracting volume, and CDK is the dominant DMS provider in that space, he said. Dealers “ found alternative means and measures to be able to conduct [deals] digitally for the business that they had, and we saw other entities come out and offer their services to those dealers to help them,” Yalich said. Credit union deals during the outage were expected to plummet for Phoenix-based Earnhardt Auto Centers , which was still trying to recover lost deals into mid-July, Sean Murphy , finance director of the auto group , told AFN . . Murphy oversees lending across 17 stores. Most of the deals that the dealership group was looking to recover were from credit unions, which were not e-contracted, Murphy said. Plainville, Conn.-based dealership Gengras Ford , held a team meeting on June 20, the day of the second cyberattack against CDK, to discuss how to continue processing orders, the dealership’s finance manager told AFN at the time. The dealership, which was under a “full digital deal” with CDK , turned to using another automotive credit application management and e-contracting platform, RouteOne , during the outage, said the manager, who asked not to be named . Meanwhile, credit unions and regional lenders remain the slowest to adopt digital contracting, but “t here's a pace of growth of adoption with credit unions,” as they look to compete with captives and banks, Yalich said. Credit unions comprised 12.6% of auto loans in 2023, according to an Auto Finance News analysis of the latest Big Wheels Rankings “Those who originate loans want to operate one way, and that way is digital,” Yalich said. "In order for a credit union to remain competitive and be a recipient of those loan offerings, they need to be in the ballgame and be enabled digitally.” Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 7-9 at Wynn Las Vegas. . To learn more about the 2024 event and register, visit www. .AutoFinanceSummit.com.

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