ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 8, 1996 TAG: 9602080075
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
DATELINE: DETROIT
SOURCE: The New York Times
IBM Corp. and Chase Manhattan Bank plan to announce Saturday a system for processing car loans over the Internet, the first move in what auto-industry officials predict will be a rapid overhaul of the way Americans borrow money to buy cars and trucks.
The new system has been in use on a trial basis for several months at a Saturn dealership in Hempstead, N.Y.
Chase, which has agreed to be bought by Chemical Bank, and IBM hope to install the system at 100 dealerships by April and 200 by the end of the year, said Jim B. Brew, president of Chase Manhattan Automotive Finance Group.
It takes about 10 minutes using the new system to obtain loan approval for an applicant with a strong credit history, compared with several hours or more using other systems that still rely on people faxing forms back and forth, said John Burns, the owner of Saturn of Hempstead, which tested the system.
The system makes it possible in some states, including New York, for buyers who have already obtained the insurance forms required by state law to buy a car on a loan and leave with it immediately.
The system is IBM's first foray into the auto-loan-processing industry, and amounts to a direct challenge to Reynolds & Reynolds Co. and Automatic Data Processing, which dominate the dealership software business.
Reynolds & Reynolds, the supplier of computer software for auto loans to half the nation's car dealerships, is developing a similar system. ``We're just putting all the software together now,'' said Jeffrey A. Wise, the company's vice president for information systems. That system, also using the Internet for communications, should be ready for testing in 10 days to two weeks, he said.
Reynolds & Reynolds has lined up two financial institutions to process auto loans through the system, Wise said, though declining to identify them.
Automatic Data Processing recently agreed to work with Digital Equipment to develop an Internet-based computer system for car dealers, said Fred Anderson, chief financial officer of Automatic Data Processing.
But the system will initially provide car information for consumers but not handle loans, said Peter M. Leger, president of Automatic Data Processing's dealer services group.
With the IBM-Chase system, a dealership finance manager and a customer fill out a loan application together on a computer screen. The information then is encoded, using an encryption program, and sent over the Internet to the computers at Chase and any other bank that may later join the system, said Neil Lustig, the IBM manager overseeing the system.
The bank's computer accepts or rejects the application and sends back an encrypted reply. Only the rejected or marginal applications will be reviewed by a bank loan officer, Brew at Chase said.
LENGTH: Medium: 56 linesby CNB