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The Online Car Dealership's Guide to Electronic Signatures

Electronic signatures are an important part of digitizing the car buying process. Here is everything dealerships need to know about using eSignatures.
December 19, 2023

The COVID-19 pandemic shifted the way Americans buy nearly everything. Today anything from a new pair of new socks to a virtual visit from a therapist is just a click away. 

But what advances have been made concerning online tools and digital processes to purchase vehicles? While auto retailing has long endured a reputation for being slower to adapt to advancements in retail, there's been quite a bit of progress toward allowing electronic signatures (eSignatures) on title and registrations forms for auto sales. In some states, customers are already enjoying a new reality, in which car buying is a paperless process that can take place on any computer or smartphone. This new process saves time for both consumers and dealers while ensuring the compliance and accuracy of contracts within seconds. 

Let's take a look at the rise of eSignatures for car buying, where it's legal to buy a car without the need for wet ink, and what the future of car buying with eSignatures might hold. 

What is an eSignature?

It's been 20 years since the U.S. passed the E-Sign Act (Electronic Signatures in Global and National Commerce), making electronic signatures as valid and legally binding as paper records. The E-Sign Act established that these electronic records now essentially qualify as information "provided in writing."

Despite the benefits of the E-Sign Act for digital transactions, not every state currently accepts documents for vehicle sales that have been completed and processed digitally. Since the E-Sign Act was signed into law, dealership associations have lobbied state motor vehicle agencies in a bid to allow eSignatures on title and registration forms.

Is it legal to buy a car with an eSignature?

The pandemic and its resulting lockdowns has caused many states to reconsider restrictions around digital signatures. In April of last year, the California Department of Motor Vehicles announced they would allow eSignatures for all vehicle purchases. "By taking advantage of available technology and the updated federal rules, we can provide this new option that can significantly change the way customers buy a car," DMV Director Steve Gordon said. "Buyers can now complete their purchase from anywhere – no ink or paper required."

As of March 2020, both Florida and Texas authorized eSignatures on vehicle transactions. 

And a bill from the New Jersey Legislature allowing digital signatures for vehicle purchases currently sits on Gov. Phil Murphy's desk, waiting to be made law. "I think everybody in the business realizes there's just way too much friction and paperwork involved in purchasing a motor vehicle," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers. "Consumers are frustrated by it; dealers are frustrated by it."

What are the benefits of an eSignature?

Electronic signatures allow the process of buying a car to be a completely digital operation, reducing paperwork, speeding up transactions, and creating a much more customer-friendly experience. The reduction of storage and security for paperwork alone benefits high-volume dealers, and the ability for consumers to find their next car from the comfort of their own home is of huge positive. 

But electronic transactions provide much more than time and space saved. Digital contracts improve accuracy and prevent incomplete information. In most cases, potential contract issues are quickly flagged before a customer completes a transaction. On the consumer side, customers can receive their funding faster, and recent data shows that the ability to review and sign documents electronically has dramatically increased customer satisfaction. 

What does the future of car buying with eSignature look like?

Though not all DMVs currently accept eSigned vehicle purchases, there's no doubt that it's the industry's future, with over 70% of consumers already reporting they want to conduct at least some parts of their car purchase online. And with 92% of current car buyers conducting research online before they purchase, we may soon live in a world where nearly all car shopping moves to an online experience. 

The pandemic forced dealerships to embrace technology in new and innovative ways to meet customers where they are. From digital test drives to signing and notarizing title and registration forms online, dealerships have a vital role in creating and innovating the future of the digital car shopping experience. For dealers already at the forefront of embracing online tools, this progress is long overdue.

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