NEW YORK –Auto dealers continue to increase the pace at which they are switching from paper-based financing to digital, new data show.
Wolters Kluwer said the trend can be seen in second quarter results and analysis from its Auto Finance Digital Transformation Index, which tracks the rate at which auto dealers, service providers and lenders are seeing growth in the evolution from paper-based finance back-office processes to digital.
“According to the Federal Reserve System’s June edition of its Beige Book, auto loan demand has slowed recently amid high interest rates, while sales continued to be steady, if not slightly up on the year,” Wolters Kluwer said. “Consumers appear to be selecting lower-priced vehicles as affordability continues to place pressure on loan demand. Despite the sluggish demand for loans, the auto industry continues to show a growing interest in digitizing loans and contracts for better back office-efficiencies.”
According to the most recent Auto Finance Digital Transformation Index, auto dealers, service providers and lenders showed a digital adoption growth rate of 7% in Q2 vs. Q2.
What Historical Data Show
“The growth rate of digital was up slightly in the first half of the year, mirroring the slight uptick in overall vehicle sales activity,” Wolters Kluwer said. “However, historically after the first quarter spike the data historically show a new plateau of digital adoption, which appears to be the case again in 2023 and consistent with the previous four years.”
In addition, Wolters Kluwer said when comparing year-over-year data for the second quarter, the volume of digital adoption was up slightly at 2% compared with a year ago. The trailing 12-month rate increased 13%, a “good sign of market stability” and recovery despite the second quarter YOY slight uptick, Wolters Kluwer said.
Budgetary Pressures
“We’re beginning to see budgetary pressures of continued sluggish auto sales impact the adoption rate of digitized back-office workflows for many lenders and dealers here in the mid-way point of 2023,” said Tim Yalich, head of auto strategy for Wolters Kluwer. “Our customer feedback is telling us that the industry continues to see great value and need to digitize all aspects of the loan and contract phases for both originations and securitization, especially since there are greater efficiencies realized when digitization is experienced along the entire journey, not just up front for the consumer.”
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