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

Digital Adoption for Lenders Mirroring Vehicle Sales Trends

According to the index, auto dealers, service providers and lenders showed a quarter-over-quarter digital adoption growth rate of 12% in the first quarter. The growth rate of digital was essentially flat year-over-year, which is in line with the lack of significant growth in vehicle sales activity over the last 12 months. While the overall activity of auto sales enjoyed a stronger-than-expected 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 experts believe the annual spring tax-buying season may have contributed to the slight increase in digitized contracting during the quarter.

“Clearl,y 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.”

Digital Adoption Continues in Securitization Markets

Securitized digital auto loans increased 32% year-over-year in the first quarter and 317.85% compared to the fourth quarter of 2022. Wolters Kluwer attributes the strong growth to the rising appetite for digitized loan origination in the secondary markets through added efficiency in pooling, auditing, collateralization, and the execution of security exchanges using digital assets. Additionally, 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.