Chase Manhattan Corp.'s auto financing division has begun using the Internet to provide dealerships with loan-approval decisions.
The bank is the first of eight financial institutions that have committed to using the system, developed by International Business Machines Corp.
By computerizing loan applications and sending data electronically, Chase officials said the bank can grant approvals in as few as two minutes.
"It reduces my costs and adds to dealer satisfaction by getting a quick turnaround," said James B. Brew, president of Chase Automotive Finance Corp.
Up to 50% of the division's auto loans will be running through the system within the next 18 months, he said.
Chase, the largest car lender not affiliated with a car company, is connected to six dealerships currently using the system and will establish connections to 100 dealers with the official introduction in October.
Other financial institutions planning to use the on-line system include NationsBank Corp., Charlotte, N.C.; GE Capital Auto Financial Services Inc., Barrington, Ill.; Regions Financial Corp., Birmingham, Ala.; and Citibank Puerto Rico.
The auto finance program, residing on the dealer's personal computer, features a user-friendly screen display with step-by-step instructions and error checks. Auto dealers can manually override the screens.
The dealer's computer is connected to the Internet through the IBM Global Network, which is also used to retrieve an encrypted report from a credit bureau.
The dealer's pre-established "key" decodes the report and causes the screen to display one, two, or three stars - representing poor, fair, or good credit. This gives the dealer an idea of which financial institutions are most likely to approve the loan.
"If the consumer is looking over the dealer's shoulder, they don't see the word 'loser' flash on the screen," said Neil Lustig, manager of the project for IBM, explaining the rating system.
Although Chase currently is the only bank with a direct Internet connection to the system, the dealer can still send loan applications to other institutions by adding their fax numbers to the screen display.
"We piloted this in our Saturn dealership, and it lent to the customer- friendly atmosphere perfectly," said John Burns, a dealer in Hempstead, N.Y.
The system costs about $700 a month, but it can also replace existing printers and fax machines.
"The old system involved faxing applications which came back with the credit worthiness in a few hours," Mr. Burns said.
Now, "the information is going in immediately and is analyzed immediately. If there is a glitch, you can discuss it."
IBM said it plans to extend connections for peripheral services like auto insurance and extended warranties. In about a year, the company plans to publish a World Wide Web site offering auto insurance directly to individual customers, said Mr. Lustig.
"When enough people use the Internet, the economic model will change," he said. "If we did that today, we would just disintermediate the dealerships."