Cyberspace pundits are predicting the Internet increasingly will be used for sending and receiving automobile financing documentation.

But whether consumers will begin to file loan applications directly to lenders remains an open question.

The outcome could be important to banks. The Consumer Bankers Association reports that banks and thrifts originated only 42.1% of the $354.3 billion of domestic auto loans made in 1995. The industry has gradually lost share to finance companies closely allied with automakers.

Direct Internet contact with consumers could help banks book loans before car dealers can steer buyers to those captive units. For this reason, many banks are interested in increasing their consumer-direct lending.

"I think a lot of customers would like to divorce the financing part from the actual buying of the car, simply because it makes their negotiating position stronger," said Ted Josephson, vice president of direct banking for Bridgeport, Conn.-based People's Bank.

People's is one of a growing number of banks planning to offer on-line loan approvals within a few years-mainly because it views the Internet as an "incredibly low-cost delivery channel," Mr. Josephson said. But it may also be a way to reach consumers who might never step into a branch to fill out an application.

"We see the Internet as a way for somebody who's getting home late at night and doesn't have time to get to a branch to be able to browse and shop at will," he said.

A soon-to-be-released study from Killen & Associates, Palo Alto, Calif., a market research company, suggested that Mr. Josephson is not alone in his optimism about Internet-based auto lending. Killen projects 20% to 30% of all auto loans will be made using the Internet by 2001, up from negligible volume today.

The research did not specifically address whether consumers would use the Internet to send loan documentation directly to lenders.

But Bob Goodwin, senior vice president at Killen, said he believes consumers will take an increasingly active role in the lending process as the Internet becomes more popular.

"If I were to project what percentage might come from consumers versus through a business, I think that the majority ... will be consumers," he said.

Randy Ellspermann, chief operating officer of Auto-By-Tel Acceptance Corp., an auto marketing service that lets consumers shop over the Internet, said, "The consumer has more control using the Internet than the traditional way, which is going into the dealership and arranging it while they're there.

"The opportunity is there for a far more convenient, efficient, and equally low-cost solution."

Despite these sentiments, the movement toward Internet-based lending has been slow.

Auto-By-Tel and Automatic Data Processing Inc., which also offers an Internet auto lending product, are each working with just one lender-Auto- By-Tel with Chase Manhattan Corp. and ADP with NationsBank Corp.

Neither company's work has resulted in lending programs that give consumers direct access to the bank.

One banker said things would remain this way.

"A consumer sitting at a terminal doing the financing themselves .... I don't think it will happen," said Anthony Langan, vice president and director of marketing for Chase's automotive finance unit in Garden City, N.Y. "It's going to be the consumer working through a dealer to get the financing."

Steve Larkin, electronic commerce manager for Dearborn, Mich.-based Ford Motor Credit Corp., agreed with Mr. Langan. "There will be a little change, but we don't think the impact on the dealers will be that great. The change will simply be that when the customer gets to the dealership he'll know more clearly what he wants."

Nonetheless, some vendors are working on systems to connect consumers and lenders directly. Credit Management Solutions Inc., which makes auto lending systems, is "investigating that area very hard," said Nancy Weil, senior vice president of marketing at the Columbia, Md., company.

In the final analysis, the success of consumer-direct lending is likely to depend on what advantages consumers see in it.

"A consumer might go with what the dealer offers because it's all right there," said Sherri Neasham, president of FinanCenter, a Tucson, Ariz., company that maintains a Web site containing information on consumer finance. "There's got to be clear benefits for the consumer to take the independent action of finding a lender himself."

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