Why Dealers Must Embrace E-Contracting in Auto Retail

Furthermore, the modern consumer desires a seamless retail journey that is short, transparent, and personalized. As part of this broader move toward digital retailing, e-contracting emerged as a crucial component for modernizing car-buying. However, this shift in consumer buying behavior is not the only factor driving this transition. Modern dealers are also becoming tech-savvy, constantly looking for ways to adopt technology to simplify the vehicle purchase experience for customers, improve their bottom line, and comply with regulatory requirements.

While many dealerships offer parts of the buying journey online, including researching, browsing through inventory, reviewing financing options, and submitting applications, few provide a complete digital retail experience. One area that faced some resistance to modernization is contracting. The adoption of e-contracting emerges as a win-win solution for dealers. By digitalizing the contracting process, dealers can not only provide a simplified buying experience for customers but also save significant time and costs.

Challenges of traditional paper-based contracting

Traditional paper-based contracting presents significant challenges that can hinder operational efficiency, increase costs, reduce customer satisfaction, and reduce profitability.

The lengthy cash conversion cycle is one key challenge dealers face when relying on traditional paper-based contracting. Paper contracts often experience delays due to several possible factors, such as missing information, human errors, or the need for revisions. The logistics of delivering paper contracts also present a challenge. The process itself is time-consuming, and there is always a risk of contracts being lost during delivery, which can further complicate matters. These inefficiencies lead to longer processing times for dealers, increased workload for employees, and delays in vehicle delivery to customers, inevitably resulting in reduced profitability and delayed funding for dealers.

While dealers face operational challenges, using paper-based contracts also involves direct and indirect costs. Direct costs include paper, printing supplies, delivery logistics, and labor dedicated to creating contracts. Indirect costs include the upkeep of supporting equipment (such as printers and ink), physical storage of contracts, and additional personnel required for managing contracts. Together, these expenses strain resources and hinder the efficiency and profitability of dealership operations.

At the same time, the growing use of paper and its disposal is becoming a cause of concern for businesses across industries, including auto retailers, who are working to adopt sustainable practices. Since auto retailers deal with large volumes of contracts, the cumulative environmental footprint is substantial. This is considerably important since, according to a recent study, 55% of consumers are willing to pay more for eco-friendly brands.

What is e-contracting?

E-contracting refers to the electronic creation, signing, and storage of vehicle purchase agreements and financing documents. While many dealers have already introduced e-signature tools within their traditional contracting process to facilitate their customers, this only digitizes part of the process. E-contracting integrates the entire contracting flow, from pre-signature validation to post-signature management, providing a fully digital experience. It plays a critical role in enabling an omnichannel retail strategy by creating a seamless transition between online and offline channels during the contracting phase of the journey. While it enhances the overall customer experience by digitizing the traditionally paper-based contract workflow, it works in conjunction with other digital retailing tools, such as online inventory browsing, lead management, and financing applications, to deliver a cohesive and connected retail experience.

Key benefits of e-contracting

Operational efficiency: By implementing e-contracting, dealers can ensure a shorter cash conversion cycle, helping them get funded quickly. It often enables funding to occur as quickly as the same day, compared to days in the case of traditional contracting. Dealers can anticipate a significant reduction in contract processing time, resulting in a quicker lead-to-contract duration.

Improved customer experience: With e-contracting enablement, customers don’t have to spend hours dealing with complex paperwork at the dealership. They can easily navigate the contracting process, including signing contracts, from the comfort of their own home. Additionally, since all contract details are validated before the customer signs the contract, customers are not required to return to the dealership in case of errors. With this modernization, dealers can greatly improve the customer experience, thereby boosting sales and profitability. Customers can also initiate the financing process online by submitting documents digitally and evaluating financing options, then seamlessly complete the purchase at the dealership with all their information already accessible and validated through the e-contracting system.

Cost efficiency: Dealers can significantly reduce costs by shifting to e-contracting solutions. These cost efficiencies relate to reducing paper use, the physical storage of paper contracts, and the additional personnel needed to manage paper-based processes.

Security, risk, and compliance: E-contracting solutions feature integrated security measures to safeguard sensitive data, ensuring compliance with regulations such as GDPR laws. Furthermore, dealers can ensure improved compliance by using automated document generation and standardized templates, minimizing the risk of errors, legal disputes, and potential penalties.

Data-driven personalization: E-contracting systems can seamlessly integrate with existing customer relationship management (CRM) and dealer management systems. Through these integrations, dealers can benefit from automated data collection and analytics that help improve performance, track key metrics, create opportunities for personalized customer experiences, and enable data-driven decision-making.

Why dealers must act now

To benefit from technology, dealers must fully modernize the entire buying experience for customers, including the contracting process. According to Autofinance News, auto loans originated through e-contracts nationwide rose 28% year-over-year in Q3 in the United States, indicating a clear increase in the adoption of e-contracting systems. E-contracting is a game-changer for the automotive retail industry, serving as a critical component of a broader digital retailing strategy. Digitizing the contracting phase helps dealerships enhance customer experience, lower costs, boost sales, minimize risks, ensure compliance, and increase profits. When integrated with tools like marketing automation, lead management systems, and CRM platforms, e-contracting helps create a seamless and fully modernized car-buying experience.

Steps to get started

Assessment and evaluation: To successfully implement e-contracting solutions, dealers must first assess their existing contracting workflows to identify inefficiencies and areas for improvement. They must also assess their technology infrastructure to ensure the successful integration of these solutions with their existing systems, such as CRMs or DMS platforms.

Partner with proven experts: To truly benefit from this modernization, dealers must partner with a technology expert with a proven track record of providing digital retailing and e-contracting solutions. NETSOL’s Transcend Retail solution for the automotive industry revolutionizes the retail experience by integrating the entire purchasing flow into an intuitive omnichannel environment powered by advanced e-contracting features that streamline the contracting process, enhance efficiency, and ensure a seamless customer experience. MINI USA demonstrated this by achieving operational efficiencies and a 23% conversion rate with NETSOL’s digital retail solution.

Contact NETSOL to learn how our solutions can support your dealership’s digital transformation.