Today, the overwhelming majority of new car buyers set up their financing through a dealership, which in turn forces lenders to search for the right dealer management system (DMS) to handle all of their business needs. However, as your business grows so does your list of needs and expenses.
A dealer management system still might manage to work fine in some cases, but the reality of it is that a loan management system (LMS) is far better suited for lenders both big and small. There are a number of advantages a loan management system has over an out-dated dealer management system, most notably coming from the fact that an LMS utilizes a modern cloud platform which provides a seamless customer experience and superior decision-making accuracy.
Interested in taking a more in-depth look at all of the key advantages a loan management system can offer? Verifacto’s proprietary LMS was specifically designed for car dealers to fully manage all of their loans from top to bottom. Before fully diving into the benefits of an LMS, let’s examine the differences between a loan management system and dealer management system and why lenders who still use a DMS for managing car loans could be holding back their business.
What is a Loan Management System?
At its core, an innovative loan management system is designed and operated to connect and assist lenders seeking high-quality collateralized loans with borrowers who require a simple access to credit. A LMS provides convenience and structure to both lenders and borrowers through its state-of-the-art end-to-end securities-based platform.
What is a Dealer Management System?
A dealer management system is a software platform that is specifically designed for the automotive industry. A DMS is responsible for handling the day-to-day transactions that occur at a dealership. This includes managing inventory, customer information, credit reports and business transactions. A DMS is also accountable for ensuring proper compliance in regards to all mandated codes and regulations. However, a DMS has its limitations, as it was initially built to originate a loan for car dealers, but not handle the management needs.
LMS vs DMS: Which is Better Suited for Your Needs
While both the LMS and DMS have their own distinct advantages, the LMS is the far superior choice for auto industry lenders. The DMS was created before the LMS as a way to manage inventory, along with origination of the loan for a dealership. Unfortunately, a DMS is not capable of executing tasks such as managing risks once the loan is originated or assisting with the communication on the payment end. Essentially the DMS was designed as a one-trick-pony that provides dealers with what they need to initiate a loan.
To this day many car dealerships and lenders still try to use a DMS to manage their loans, but since the DMS is not designed to operate to that extent it’s actually holding back these dealerships and lenders. On the flip side of that coin, a LMS is tailored specifically to manage loans on a daily basis and offers much more powerful and robust features to help scale operations across the board.
In the past a DMS was the only option for dealers to manage their loans and since DMS was created before LMS, there’s some misconceptions as to which is more effective. The purpose of a DMS is to work on the front of the dealership – strictly securing loans. A LMS encompasses every action after the loan is originated, such as managing and avoiding insurance risks, providing clear and constant communication with customers and streamlining payments. A DMS can be used on the front end, but was not intended for long term management.
When comparing LMS and DMS it’s important to key in on the effectiveness of each system. A LMS allows for a much more convenient approach to payment processing, while one of the largest DMS providers just recently added a feature for online payment after 30 years of an elongated payment process.
A DMS also fails in comparison to the LMS in terms of customer communication – a key component for collecting payments and ensuring there are no insurance risks to your fleet of vehicles. LMS was built with the intention of providing a more efficient way to communicate clearly with customers, while modernizing the payment processing to help lower risks.
The DMS has been modified over the years to try and manage loans, but since it was never originally built as a loan management tool, just for origination, it’s not as effective. Verifacto’s loan management system provides auto industry lenders with the ability to quickly collect loan payments on time and expertly manage individual loan statuses and insurance risks all on one single interface for improved capacity and profitability.
Discover how Verifacto’s loan management system can help streamline your business operations and maximize ROI. Contact us today to access the LMS for FREE when you use Verifacto’s payment processing and insurance tracking accounts.