Get ready for the brave new world of automobile financing.

Amid radical changes in the way cars are sold, major lenders and technology vendors are in a race to vastly simplify the process of approving and funding auto loans.

In one of the most dramatic initiatives, International Business Machines Corp. is expanding its test of a system that enables lenders to usher applications through the approval, contract, and funding stages in as little as 20 minutes.

Chase Manhattan Corp., which kicked off the pilot last fall by connecting six auto dealerships to the IBM system, will add 100 more in the next 90 days, said Anthony T. Langan, vice president of Chase Automotive Finance, Garden City, N.Y. Twenty of those are expected to go on-line this week.

NationsBank Corp. and Citibank Puerto Rico have also joined the test, said Thomas J. Young, a solutions manager for IBM. The IBM system, dubbed Auto Loan Exchange, has been in development for two years and should be open to all lenders by summer.

IBM is not alone. Similar initiatives by software vendors CMSI Inc., Reynolds & Reynolds Co., and Experian Inc. were the talk of the Consumer Bankers Association's annual Automobile Conference & Trade Show, which drew more than 700 lenders and suppliers here last week.

Lenders said the new technology is having a profound effect on the auto loan market, where volume runs about $325 billion a year. The systems allow car dealers-"an industry that has been starved for technology," in Mr. Young's words-to help buyers get funding quickly and efficiently even when banks aren't open.

"Lenders need to know the revolution has started," said Richard T. Schliesmann, executive vice president at Wells Fargo Bank and chairman of the trade group's auto finance committee.

The loan systems are rolling onto the scene just as auto dealers are facing rising competition from a small but growing group of auto supermarkets.

Armed with research showing that consumers rate car-buying about as pleasant as a trip to the dentist, companies such as Carmax, Auto Nation Inc., Auto-By-Tel, and Driver's Mart Worldwide have sprung up, promising no-hassle, no-haggle shopping.

R. Steven Strader, a former NationsBank Corp. executive who is now chief financial officer of Grand Rapids, Mich.-based Driver's Mart, summed up the new breed's philosophy: "The system is badly broken. The consumer deserves a better way to buy a car."

Girding for battle with these new rivals, auto dealers are feeling tremendous pressure to curb costs. That's where the new loan systems come in.

Thanks to the boom in credit-scoring systems, many lenders already offer nearly instant loan approvals, Chase's Mr. Langan explained. But it can still take five or six days to put loan proceeds in the hands of car dealers, raising the carrying costs on their inventory.

The loan systems can whittle the time between loan approval and funding because they eliminate the paperwork errors and delays that plague auto lenders. As many as half of loan applications processed at car dealerships contain errors or illegible entries, lenders attending the San Diego conference said.

"Today, even if we give automatic approval, there's still the contract and the electronic payment to deal with," Mr. Langan said. By reducing the time spent on those steps, these systems "could have the effect on the auto finance industry that the fax machine had 15 years ago."

But others warned that these systems, for all their benefits, could be out of the reach of many small banks. "To provide an answer in 20 minutes or less is going to take a capital investment that many people aren't going to be able to make," said Mr. Schliesmann of Wells Fargo.

To be sure, no one expects the auto loan systems to completely supplant established ways of doing business. "If the dealer wants to continue to do business by fax, the financial institution has to continue to receive faxes," said IBM's Mr. Young.

Mindful that inertia is a powerful form of resistance, suppliers are taking pains to make the systems extremely appealing to car dealers. The IBM and CMSI systems, both of which were demonstrated at the auto finance conference, feature colorful, eye-catching, and easy-to-use screen displays.

IBM's Auto Loan Exchange, which uses the Internet to connect dealers with lenders, is said to be the most ambitious of the new systems. IBM has been lining up important support from credit scoring software vendors. Two- APPRO Systems Inc. and CFI Proservices-recently agreed to create interfaces with Auto Loan Exchange, and a third is preparing to follow suit. The agreements should make it easy for banks that use these credit scoring systems to link up with Auto Loan Exchange.

Software vendor CMSI, meanwhile, has moved well beyond the pilot stage, having put its Credit Connection auto loan system "into production" last July.

One of its distinctive features is that customers who don't qualify for prime credit can be automatically referred to a nonprime lender. BankAmerica Corp., First Virginia Banks, Wells Fargo & Co., NationsBank Corp., PNC Corp., Money Store, and GE Auto Finance Services are among the lenders now using the CMSI system.

"It's zooming," said Brian S. Fritsche, director of customer services. "The dealerships that move, say, more than 75 units a month are really embracing this."

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