Automatic Data Processing Inc. and Reynolds and Reynolds Co., two fierce rivals and the leaders in the automotive dealership technology space, are creating a joint venture they say will smooth out some of the inefficiencies in the credit-application process for lenders and car retailers.

The new venture, Open Dealer Exchange, promises to integrate the entire loan-origination process into the dealer-management system, allowing the dealer to embed the credit application throughout the various steps in the sales process.

Dealers typically have to work with two systems in the finance and insurance office, one for credit applications and another for the sales transaction. ODE says it integrates the two, speeding up the sales process and reducing the potential for mistakes.

ODE's software will populate the customer data automatically onto all of the appropriate forms, meaning dealership personnel won't have to re-key customer information multiple times.

Once the credit application has been submitted and approved by the lender, ODE compares information on the credit application with the data on the sales contract to make sure there are no discrephrenacies. Depending on the lender's technology, the entire process could be instantaneous.

“The capstone piece is the ability to electronically transmit the entire funding packet from the dealership to the lender,” says Marty Zwolan, vice president-sales and operations, for ODE.

As a result, dealers should have faster access to money generated by the sale, instead of having to wait several days for what the industry calls “funds in transit.”

“Vehicle financing is no longer just an F&I transaction,” Zwolan says. “The vision for this company will be to transform traditional finance sources and dealer relationships to help close and fund more deals.”

The announcement of ODE coincides with the opening of the American Financial Services Assn.'s annual vehicle-financing conference in New Orleans in conjunction with the National Automobile Dealers Assn. convention..

The JV's establishment creates somewhat of a stir because ODE will compete directly with DealerTrack Holdings Inc., the industry leader in credit application.

Reynolds and Reynolds and ADP hope ODE's pricing model and advanced software will help it gain quick momentum. Lenders will pay only for the applications they fund.

DealerTrack charges lenders a fee for every application they view. When DealerTrack launched several years ago, its application actually caused look-to-book ratios (the number of applications lenders consider vs. the number they fund) to decline.

Although it was an issue for financial institutions, the payoff for lower efficiency was greater volume and more access to dealers and consumers.

In recent months, lenders have begun to shut out dealers who often “shotgunned” applications through DealerTrack. Additionally, the number of applications has declined, thus improving the lenders' look-to-book ratios, analysts tell Ward's.

DealerTrack has an advantage because it has relationships with more than 700 banks, a number reached after eight years.

Meanwhile, ADP and Reynolds and Reynolds supply the computer systems to more than 80% of the franchised dealers in the U.S.

In the end, lenders and dealers are the winners, because more competition means better pricing and stronger applications.