The secret to expanding deeper auto dealership relationships? AI

Picture this: your financial institution has received a mandate to increase your auto lending business by 20% in the coming year. Now, you're sitting around a conference room with a group of colleagues brainstorming ideas for accomplishing this lofty goal.

What will you suggest?

You could recommend lower rates or more flexible terms. Maybe you want to step up your marketing or launch a new mobile app that streamlines the application process.

While any of these efforts might help a little, you'll get more impressive results by focusing your efforts on a different direction: the auto dealers.

Most new car buyers don't spend much time shopping around for the financial institution that will provide their loan. They spend most of their time picking out the right vehicle. Then, they select the lender from the two or three options that the dealer puts in front of them.

The key to getting more auto loans is to be among the options that the dealers suggest to their customers. And you can improve your odds of being on the shortlist by making life easier for car dealers.

Why dealers hate the loan process

For auto dealers, loans are a necessary evil. About 80% of new car buyers can't purchase a vehicle without financing. But the process of obtaining funding on the loan creates a lot of headaches for the dealership.

First of all, the process is slow. While it might not take long to fill out the application and get the initial credit check, it can take days or weeks to get the loan funded by the lender. Normally, that means the dealer lets the customer drive off with the vehicle long before they have their money.

The documentation requirements can also be burdensome. Borrowers might have to input the same information multiple times and provide paper copies of documents like driver's licenses, pay stubs, tax returns, proof of residence, and proof of insurance for the borrower and any co-signers.

In many scenarios, problems with the loan funding process mean that the dealer has to contact the customer and get them to come back in to complete additional paperwork or provide additional documentation. Reengaging the car buyer is time-consuming and costly for the lender and car dealer while degrading the consumer’s car buying experience.

Lenders can eliminate many of these hassles through smart use of AI technology to streamline the lending process. That makes both car buyers and dealers happy, potentially resulting in more business for the lender.

A four-part framework for automating the lending process

To be clear, AI is not a magic bullet for addressing dealer pain points. The kind of AI that is the most useful isn't the generative AI like ChatGPT which has gotten a lot of attention recently. The most useful AI for lenders incorporates intelligent document processing into a digital experience platform. The most successful lenders rely on a four-part framework:

1. Digitize borrower documents and auto loan contracts. Whenever possible, borrowers should provide necessary information and signatures digitally through a laptop or mobile device. Any paper documents necessary for approval should be scanned or photographed at the dealership to save time and speed up the workflow.
2. Automate contract ingestion and document processing. Once the digital content is in the system, intelligent document processing can extract and standardize any information from the digitized documents. For example, instead of a loan processor typing in a driver's license number and potentially making a mistake, the automated system identifies the document type, then locates the number and enters it into the funding platform automatically. Human intervention is necessary only to deal with unusual circumstances.
3. Streamline contract validation, delivery, and bank review. AI-enhanced workflow automation applies pre-built models and workflow rules to the ingested content, transforming the unstructured data into structured funding data used to drive the lender’s funding process. Business rules are configurable to each lender’s unique funding requirements. This further accelerates the process while minimizing errors and providing the cross-checks necessary for regulatory compliance.
4. Work with a trusted partner. There's no need to develop these capabilities in-house. By working with an experienced vendor, you can deploy your solution more quickly and avoid the pitfalls that sometimes trip up financial institutions that try to go it alone. A trusted vendor’s managed service capabilities allow the lender to nimbly respond to market opportunities without significant infrastructure expansion.

Happy dealers, happy lenders

This four-part approach has some key benefits for car dealers. First, they get their funding faster, which helps their cash flow and bottom line.

Second, the automated system makes fewer errors than a system dependent on human input alone. That reduces the chance that the dealer will have to ask the customer for additional documentation, improving customer satisfaction.

This approach also provides some additional benefits for lenders. A Forrester study found that a financial institution deploying an intelligent document processing solution could realize $3.5 million in return on investment over three years. In addition, the lender receives more accurate and robust borrower information, enabling future marketing efforts to deepen the lender’s relationship with the borrower.

Start the upward cycle

When dealers are happier with the loan funding, they send more business your way. And as you write more loans, you can further refine and streamline the process, leading to even more opportunities.

To learn more about how to use AI to improve your relationships with auto dealers, read the white paper "Accelerate auto financing with artificial intelligence: A four-part framework." For more information about optimizing your digital future, explore the capabilities of AI and a unified asset strategy.