Auto Finance Index Reflects Digital Transformation Adoption

Wolters Kluwer, a provider of professional information, software solutions and services, announced fourth-quarter and year-end results and analysis from its Auto Finance Digital Transformation Index, which tracks the rate at which auto dealers, service providers and lenders see growth in the evolution from paper-based finance back-office processes to digital. Click here to see the complete data report.

According to the index, auto dealers, service providers and lenders showed a digital adoption growth rate of 56% over the last year, dating back to the fourth quarter of 2021. That is significant, considering that the U.S. auto industry saw 2022 new sales reach just 13.7 million, the lowest annual total in more than a decade and an 8% decline from the previous year. For more complete context, annual sales had crested above 17 million in the five-year period prior to 2020, when Covid-19 impacted the industry.

“The continued macroeconomic impact in auto purchases is having an effect on the index’s rate of adoption measure and overall e-contract volume, but year-over-year digital adoption still remains steady and positive,” said Tim Yalich, head of auto strategy at Wolters Kluwer. “In looking ahead to 2023, early estimates from analyst firms are pointing to a slight increase in sales activity, but we believe companies throughout the industry are realizing the value and benefit digital resources, assets and processes are injecting into operational efficiencies, regulatory compliance needs, and overall profit preservation.”

Digital Adoption in Securitization Markets

Wolters Kluwer's report also shines a spotlight on digital asset and workflow adoption in the securitization markets. As a way of contextual analysis, and based on an analysis of data from Wolters, the digital adoption rate increased 36% over the past five years. While the adoption rate is expected to drag this year based on challenging automotive market conditions, the ongoing upward trend of securitizations suggests that the trust in digital loan origination and management is well established in the secondary market, with companies realizing efficiency gains in the pooling, auditing, collateralization and the execution of security exchanges using digital assets.

According to industry data, auto asset-backed securities totaled $110 billion in 2022, down 16.7% year-over-year. Industry observers expect auto-specific ABS to remain relatively flat in 2023. Despite the pause in volume growth, a recent Wolters Kluwer survey showed that roughly 82% of lender executives said they plan to digitize more of their securitization processes, paperwork and workflows this year.

Originally posted on Auto Dealer Today