NEW YORK—The upshifting to digital-based auto financing among dealers and lenders continues, growing by more than 10% in Q1 2023 over Q1 2022, a new report shows.
The data was released by Wolters Kluwer as part of its Auto Finance Digital Transformation Index, which tracks the rate at which auto dealers, service providers and lenders are moving away from paper-based finance back-office processes to digital.
According to the Index, auto dealers, service providers and lenders showed a digital adoption growth rate of 12% in the first quarter compared with the fourth quarter of 2022. The growth rate of digital was essentially flat comparing year-over-year, which is in line with the lack of significant growth in vehicle sales activity over the last twelve months, the company said.
“While the overall activity for auto sales enjoyed a stronger-than-expected first quarter, industry observers such as Cox Automotive believe it is difficult to pinpoint an exact forecast for the remainder of the year. The firm gently raised its full-year forecast to 14.2 million new sales, up slightly from 14.1 million at the beginning of the year,” Wolters Kluwer said in releasing the analysis.
Wolters Kluwer is predicting the annual spring tax-buying season may have contributed to the slight increase in digitized contracting during the first quarter.
‘Not Surprised by Growth’
“Clearly 2023 has remained a highly competitive environment where dealers and lenders remain focused on overcoming economic challenges to find sales and portfolio growth,” said Tim Yalich, head of auto strategy for Wolters Kluwer. “We are not surprised that the growth of digitized back-office processes and documentation has slowed to also mirror vehicle sales activity, and we expect dealers and lenders are keeping a watchful eye on the progress of sales growth as they plan additional investments in digital.”
Additional Data Points
Other data points included in the analysis:
- Securitized digital auto loans increased 32% in the first quarter compared to the same time last year. What’s more, securitized digital auto loans increased 317.85% compared to the fourth quarter of 2022. Wolters Kluwer said it attributes the strong growth in securitized markets to the rising appetite in digitized loan origination in the secondary markets through added efficiency in the pooling, auditing, collateralization, and the execution of security exchanges using digital assets.
- The more than 300% growth rate can also be attributed to a seasonality trend based on historical data as many lenders seek capital in the first quarter compared to the fourth quarter, the company stated.
Click here to see the complete data report.
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