How Lenders and Dealers Differ In Adopting New Technology

From mobility to online car shopping, technology has made leaps and bounds in the auto industry, and while this area might be small, it’s growing sooner rather than later.

Lenders and dealers have no shortage of options when it comes to implementing new technology into their processes, but despite the fact that lenders and dealers often work together, the two don’t necessarily need the same requirements.

In fact, lenders and dealers can have different attitudes about how they adopt new technology, looking for the right software that will best suit their individual needs.

“Lenders do have different appetites of how they want to participate,” Andy Mayer, vice president of F&I solutions at Dealertrack, told The Center for Auto Finance Excellence. “I do think that you’re seeing banks that are trying to promote their brand and retain customers by having their own presence online. And other lenders are just willing to be a servicing solution behind the scenes for their dealership partners.”

Lenders can be very measured in how they incorporate new technology, needing to keep in mind compliance burdens and further technology changes.

“They do a substantial amount of due diligence to understand what the ultimate benefit is to the consumer,” Kevin Singerman, chief executive officer and co-founder of Autofi told CAFE. “How it affects the dealer relationship and their operation, does it help them grow market share and become more efficient before deciding to partner with someone?”

Conversely, Dealers are on the “front lines” of the market and need to evolve around shifting consumer, added Singerman. “The impetus to try out new things and the speed to do that is substantially lower than it is with lenders, in our experience.”

The main source of dealer apprehension comes from attempting to preserve profitability, which typically comes down to selling F&I products. The dealer is concerned with maximizing profitability with the deal, but the lender is more concerned with ensuring the profitability of the contract.

However, dealers understand why having transparency in the deal is attractive as a consumer, but changing too much of the “back office” processes at once tends to make adoption of technology more difficult, Singerman said.

Lenders need to keep compliance in mind when they make their business decisions regarding technology and how that affects them.“[Lenders] are concerned about fraud and about compliance,” Mayers said. “I think they have different technical needs, but they also have regulatory needs driving how they do business.”