Selecting the Best Auto Loan Origination or Auto Lease Origination Software

How do you select the best auto lease or loan origination software (LOS) for your institution? The best auto LOS systems do more than help you address current business goals; they help you adapt to market dynamics and quickly implement the needed policy and procedural changes. 

In our years of experience focused on lending, we’ve worked with banks, credit unions, and fincos to develop and support solutions for a wide spectrum of lending requirements. When you’re faced with the challenge of implementing a new auto lease or loan origination solution, consider these capabilities that deliver greater efficiency, lower operating costs, and enable you to quickly adapt to changing market conditions.

When it comes to modern auto lease or loan origination solutions, these are the key capabilities to look out for: 

• A cloud-based platform for rapid implementation, frequent software updates, and lower CapEx and OpEx costs. 
• Configuration menus that allow lending professionals to easily customize the solution to match your lending requirements. 
• Mobile access to meet the expectations of today’s consumers. 
• Pre-integrated information sources that accelerate lending decisions while reducing risk. 
• Integrated analytics for insight into lending trends and process efficiencies. 
• Seamless integration with loan servicing software. 

Let’s delve deeper into why these key features were singled out and what their impact means to you. 

A Cloud-Based Platform—Vital and Cost-Effective

The advantages of the cloud are indisputable. The growth of cloud solutions across all industries is evidence of its economic and operational value. Cloud service providers invest heavily in processing, storage, and communications infrastructure to provide superior performance, high availability (by using redundant hardware with failover capability), and scalability that can easily match the pace of auto lending cycles. Cloud service providers offer this infrastructure and quality of service more cost-effectively than buying, maintaining, and operating your own on-premises infrastructure. With the cloud, you no longer have to purchase, provision, and manage computing infrastructure. This leads to reduced CapEx and OpEx costs for lenders. 

A cloud-based lease or loan origination solution also makes it easier for lenders to take advantage of the latest software improvements. Updates, patches, and new releases are automated, allowing employees to immediately take advantage of the improved features and functions without making demands on a lender’s IT organization. 

Whether you’re a bank, credit union, or finco, a cloud-based lease or loan origination platform is quickly becoming a requirement for efficient loan and lease origination. 

Learn More: Your Loan Management Software Should Be Cloud-Based. Here’s Why.

Configurable Menus to Easily Customize Your LOS 

Configuration menus are an equally important capability in an auto LOS. Legacy lease or loan origination software typically requires extensive and expensive programming to transform standard software to meet the specific needs of a lender. In contrast, configuration menus allow lending professionals to easily customize nearly every aspect of the lease or loan origination software.   

A few examples of the modifications that are easily made by lending professionals include:

• Customizing the user interface by selecting the data to display, labeling them, determining locations on the page, and customizing scorecards for various loan types. 
• Creating custom dropdowns mapped to custom fields used throughout the lease or loan origination process. 
• Developing formulas to calculate anything from simple math to debt/income calculations and complex credit evaluations. 
• Formulating decision rules to automate and consistently execute critical workflow steps, including pre-bureau, credit bureau waterfall, post-bureau, auto decline, existing customer, conditional approvals, auto structure, and funding. 
• Integrating a wide range of cloud-based information sources to enhance process efficiencies and reduce lending risk.

Customization via configuration menus facilitates faster implementation by enabling lending professionals who are most knowledgeable about specific aspects of the loan and lease origination process to easily modify the solution to meet those needs. And as market conditions change, modifications to meet those changes can just as easily be made. 

There’s an added benefit of customization via menus—behind the scenes, the software maintains records of all changes that were made, when, and by whom. Auditable records can help demonstrate compliance with regulations that were or are currently in effect.

Learn More: What Loan Management System Configuration Does for You

Mobile Support to Meet Consumer Expectations

Today’s consumers have become accustomed to any time, anywhere transactions via mobile devices. Submitting a loan or lease application and tracking its progress should be just as easy as ordering from a retailer and knowing when the package will be delivered. To successfully compete in the current market and capture a greater number of lending opportunities, banks, credit unions, and fincos should support mobile loan and lease submissions. To best address consumer expectations, the lease or loan origination software should:  

• Support WYSIWYG design of forms and fields to provide a loan or lease submission experience that reflects your unique lending practices and brand. 
• Employ mobile-responsive technology to preserve the user experience on leading mobile devices, allowing applications to be accessed and submitted any time, anywhere. 
• Provide a streamlined mobile process using display logic to present information and prompts in an intuitive, easy-to-understand manner. 
• Allow digital document capture for driver’s licenses, pay stubs, or other documents to accelerate the application and review process. 
• Allow consumers to stop and resume the online process without the application losing any data.

With mobile capabilities, you significantly expand lending opportunities to thousands of potential customers who expect to conduct business via mobile devices.

Learn More: Mobile Auto Financing Software: Benefits for Consumers and Lenders

Data Sources and Services for Better Lending Decisions

Lending risk is reduced when lending decisions are based on data that paint a clear, detailed picture of applicant creditworthiness. Credit bureau scores make it easy to quickly approve “exceptional” and “very good” scores and immediately decline “very poor” scores. Applicants with “fair” or “good” scores take a bit more scrutiny and processing time. For those ranges, credit bureau scores alone don’t provide the level of financial details required to confidently make lending decisions—alternative credit data sources are needed. 

Offer a Clearer Picture of an Applicant’s Financial Standing

The wealth of consumer data now available as a result of the proliferation of digital transactions is empowering lenders to more confidently make lending decisions. Consumer data such as utility payments, rental records, employment, and income are alternative credit data sources available to lenders to help provide a clearer picture of an applicant’s financial standing. 

By combining alternative credit data with traditional credit bureau scores, lenders are better prepared to:

• Offer interest rates and terms that more closely match the creditworthiness of applicants, thereby reducing credit risk. 
• Qualify applicants who have “thin” credit files but demonstrate solid financial footing via alternative credit data. Without the perspective provided by alternative data, these applicants would likely end up being overlooked. 
• Consider applicants with poor credit scores who nonetheless show improved financial strength via alternative data sources.

Learn More: Which Alternative Credit Score Companies Are Best?

Reveal Changing Financial Situations

Trended credit data provide up to 30 months of detailed credit payment history, including card balances, minimum payments due, actual payments, and any amounts past due. Trended credit data provide an additional means of increasing lending opportunities while reducing risks. Below are two examples of how trended credit data helped lenders make more grounded decisions:  

• Trended credit data revealed that an applicant with a subprime score paid off an $8,500 balance during the past two years with each monthly payment larger than the previous payment. This trend shows improving financial strength, allowing a lender to offer better terms than a credit score alone would indicate.
• An applicant with a credit score of 740 represents a low risk. However, upon further analysis using trended credit data, it was revealed that they consistently make the full monthly payment and that their balances increased by an average of $750 each month in the past 18 months. These additional insights allow a lender to offer more competitive terms and boost the chances of gaining a reliable borrower.

Learn More: Using Trended Credit Data for Better Lending Decisions

Identify Potential Fraud Proactively

Consumer information acquired by nefarious individuals or organizations is being used to defraud lenders of millions of dollars annually. To combat this growing problem, lease or loan origination software needs to incorporate fraud detection capabilities that help automate the application evaluation process and identify potential fraud associated with stolen identities, false income statements, misrepresented employment, or inflated vehicle values. 

A range of cloud-based information services allow lenders to automatically validate applicant data, flag applications where fraud is suspected, and allow experienced underwriters to review the questionable applications to determine the appropriate next steps. 

The best auto loan and lease origination software solutions provide pre-integrated information services, allowing you to select the specific services you need and immediately incorporate them into the loan or lease origination process. 

Learn More: Where Fraud Is Headed in a Post Pandemic World

Analytics for Continuous Process Improvement

To truly be competitive in the auto lending market, you’ll need integrated analytic capabilities. Analytics applied to the volumes of data generated by your LOS provides invaluable insight regarding applicants, lending decisions, and process efficiencies. Analytics lets you answer the following (and nearly any other) questions you might ask regarding lease or loan origination:

• Which dealers are the majority of applications coming from?
• What percentage of applications are direct?
• Which states, cities, and zip codes provide the greatest number of applications?
• How many applications were auto-declined last quarter?
• What were the primary reasons for declines?
• Which underwriter had the greatest number of overrides last month?
• What is the average response time to applications submitted via mobile devices?
• What is the trend in the look-to-book ratio for the last six months?

Analytics fully-integrated with the auto LOS eliminates the technical problems associated with data querying databases. There’s no need for SQL skills—configurable dashboards allow lending professionals to easily conduct the analysis and create reports tailored to their specific responsibilities for loan and lease origination. 

Lenders who regularly use analytics to evaluate loan and lease origination processes can apply that insight to fine-tune credit policies in response to market changes. Analytics also help identify and mitigate bottlenecks in loan and lease origination processes and anticipate future trends based on analysis of historical data.

Learn More: How Integrated Analytics Improves Auto Los Efficiency

Seamless Integration With Loan or Lease Servicing 

Configurable cloud-based loan and lease origination software that supports mobile submissions, incorporates cloud-based information services to help accelerate lending decisions while reducing risk, and offers integrated analytics allows a lender to tailor a solution to best meet their specific lending practices. But the customer service experience doesn’t stop with origination. 

The best loan and lease origination software solutions are tightly integrated with loan or lease servicing. This ensures a smooth transition from origination to servicing, providing all the relevant information to both borrowers and servicing agents. And just as mobile opens new lending opportunities, mobile can also enhance servicing by enabling a borrower to securely access relevant account information, set up automated payments, determine current pay-off amounts, and better manage the loan or lease. Mobile servicing also reduces call center volumes, allowing servicing agents to focus their time and expertise on customers who truly need assistance.

Learn More: How a Loan Servicing App Can Reduce Your Workload and Boost Borrower Satisfaction

Auto Lease or Loan Origination Software: Capabilities to Compete

The key capabilities described above will allow banks, credit unions, and fincos to implement auto loan and lease origination solutions that best meet your specific lending needs. In the ultra-competitive lending industry, the features and benefits of a modern auto LOS are essential to efficiency and profitability.