How Auto-Financing Software Is Making the Car Business More Efficient and Profitable

Financing Automation & AI

Increasing consumer demand and the rise of digitalization have conspired to put the spotlight on making car sales more efficient and car financing more profitable.

First, after a pandemic-induced slip in mid 2020, demand for automobiles has come roaring back in 2021. In fact, though production has been bottlenecked by a shortage of the silicon chips cars and trucks need these days, autos are being sold on backorder before they even roll into the showroom.

And the average cost of a new car these days? Nearly $40,000, or 19% higher than in 2015. Average monthly payment for a new car? $568, for an 18% jump in six years. Meanwhile, average used car payments have gone from $355 a month in 2015 to around $400 a month this year — an increase of 13%.

The point here is straightforward: the more a thing costs, the more likely a buyer will require financing.

Though demand for cars is outstripping demand, car sellers are too smart for complacency. They know that US auto debt is on the rise, growing by a cool $80 billion in 2020 to $1.37 trillion. And they know terms are expanding as well, with the average — 63 months early in 2021 — getting dragged higher by the growing popularity of financing periods of six years, even seven years.

Digitalization is putting sales everywhere and anywhere

Meanwhile, digitalization is reshaping consumer expectations. Car-shoppers want a smooth and stress-free experience characterized by:

  • A minimal interest rate
  • Same-day or instant loan approval
  • As few touchpoints as possible

As far back as 2015, well over half of car shoppers were eager to purchase from a dealership that provides their “preferred buying experience,” even if it didn’t offer the lowest price, according to Autotrader.

Despite this new mindset, however, “most dealers continue to grapple with traditional challenges that can be solved with intelligent automation — things like outdated paper-based processes, inaccurate borrower evaluations, unscalable lending programs, and inflexible installment plans and rates,” says Dmitry Voronenko, co-founder and CEO of TurnKey Lender, a leading vendor of automobile-financing software. “Instead of letting these outmoded approaches erode productivity, a growing number of savvy car dealers are putting loan management on autopilot in ways that sideline the middleman and provide credit services directly to the customer, all while trimming risk and reducing time to market to as little as one business day without compromising on quality or functionality.

Not just car dealers: taking a broader view

In fact enterprises of all sizes are changing how consumers fund purchases of all sizes and kinds, from sports gear and armchairs to barbeques, boats — even cosmetic surgery. By providing credit at the point of sale, whether that’s online or in-person, these non-traditional lenders can boost revenue, build efficiencies, and boost customer loyalty.

When businesses control lending processes internally with help from a technology partner instead of farming it out to a bank or other traditional player, they can develop a new profit center with control over everything, including particulars such as:

  • Interest rates
  • Approval criteria
  • Grace periods

— all without sharing fees with a third party.

In turn, an in-house lending department can bolster loyalty programs and provide analytics to illuminate consumer behavior and inform loyalty campaigns and other marketing initiatives.

After automating their credit programs, businesses with pre-existing loan portfolios see a 49% increase in portfolio profitability on average, and a 67% hike in customer loan-to-value growth, according to TurnKey Lender, whose “buy here, pay here” financing program is used by car dealers around the world.

Intelligent automation also speeds things up. Especially when its processes are powered by advanced artificial intelligence, a market-tested lending-tech can also speed loan approvals to a matter of just minutes. In contrast, third-party approvals can take hours, even days to make a decision.

Auto dealers have a new weapon in the war against complexity

Above all else, smart financing software lets car dealers cut through complexity, whether it stems from internal considerations such as difficulties around risk assessment, core-software integrations, collections management, scalability, or a need for dynamic sales and lending analytics, or external forces in the form of backorders and lengthening loan terms.

TurnKey Lender’s “service as a software”  Unified Lending Platform is an intelligent white-label financing platform that automates the entire loan life cycle, including:

  • Application processing
  • Risk assessment
  • Decisioning
  • Loan origination
  • Underwriting
  • Servicing
  • Collections
  • Reporting
  • Archiving

It also helps pre-qualify applicants in seconds using an advanced credit-decisioning engine.

Our all-digital platform further gives auto dealers an intuitive dashboard, and the means to easily adjust for the specific business needs, even including traditional and alternative means of credit-risk assessment,” says Voronenko. “In addition to providing proprietary artificial intelligence and bank-grade credit infrastructure, the platform automates every step of the lending process in a system that can be stored on in-house servers or tucked securely into the cloud.”

Integrations for the capabilities car dealers need most

Among other special features of TurnKey Lender’s financing platform, auto dealers can count on:

  • Built-in GPS Tracking and Remote Control

Dealers can remain in full control of vehicles until they are paid off. Easily locate and, if need be, shut the engine off remotely

  • Vehicle identification

The system decodes data and creates reports that help identify and track vehicles, even when they’re on the move

  • “Geofencing” for lessors

Typically used to direct targeted marketing with geographic confines, the technology also helps dealers keep watch over their vehicles

  • Comprehensive insurance records and retrieval

Fully automate the process of collecting and maintaining insurance records. All the data neatly organized and presented in an easy-to-consume manner help both your customers and you do business without excessive efforts

One US dealership that uses TurnKey Lender saw 50% year-over-year growth in revenue after one year, with sales still trending higher.

Dealerships have a chance to “amplify engagement” like never before

Besides promoting internal efficiencies by installing an in-house financing program while cutting operational costs, SaaS approaches to auto financing can help flatten seasonal revenue curves and make cash flows more predictable year round.

The traditional approach to loan-portfolio management focuses on collections and overall performance, with origination seen as a secondary component in the loan-servicing and -management equation.

But that’s changing with the advent of artificial intelligence, which allows for more nuanced — and ultimately more inclusive — procedures for vetting would-be borrowers. After all, focusing on one or two aspects of loan management to the exclusion or neglect of other aspects can leave senior management blind to the big picture they’re responsible for monitoring.

And putting origination on an equal footing with other parts of loan management does more than provide holistic overviews. It puts extra resources into gatekeeping, providing a crucial first step in credit-risk evaluation and fraud detection, a must-have for overall portfolio health.

Auto-financing software lets dealerships present consistent pricing and installment-payment options to customers, whether they’re at home, in the showroom, or in the farthest corner of the lot,” says Voronenko. “And, whether by chat, text, email or in person, dealerships can amplify engagement while building a brand image synonymous with speed, efficiency, and fairness.

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