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Pulling the Trigger

November 2009, F&I and Showroom - Feature

by Tariq Kamal

The past decade has seen the addition of a number of marketing tools to auto dealers’ arsenals. Among them are trigger leads, a relatively inexpensive but somewhat controversial means of finding in-market car buyers.

When a shopper applies for auto financing through a dealer or lender, their credit app “triggers” an inquiry at the credit reporting agencies. The bureaus can then generate lists for sale to resellers, who can break them down by ZIP code, credit score range and other factors, then scrub them against federal prescreen opt-out and do-not-call databases before passing them on to dealers.

The leads are fresh — most providers offer leads to customers who applied for credit within the last 24 hours — and relatively inexpensive. But there are disadvantages as well. Customers may react unfavorably to unsolicited calls or mailers and may wonder how a dealership they never visited acquired such personal information.

Will trigger leads work for your store? Before you decide, let’s take a closer look at the pros and cons.

Pro: Trigger leads benefit consumers by promoting competition.

Trigger leads are regulated by the Federal Trade Commission (FTC) under the terms of the Fair Credit Reporting Act. The FCRA expressly allows the bureaus to sell prescreened consumer reports. In theory, trading such information creates more competition and drives down interest rates marketwide.

Denny Long is senior vice president of Dealer Marketing Services and helped design its Market Thief trigger leads program. He believes that triggers benefit not only those customers who may qualify for a better rate, but also those who are turned away.

“How many customers walk into the wrong dealership and are told, ‘You can’t get credit?’” Long asks. “If you’re the best in your market at getting customers financed, you need to let those consumers know there is a good chance your dealership can help them.”

Con: Trigger leads carry some risk of fraud.

Trigger leads first became popular in the mortgage industry, where financing takes weeks, not hours, and brokers have ample time to lure customers away from their competitors with lower rates. Trigger leads came of age during the latest housing boom, a time that Rebecca Kuehn remembers well. As the assistant director of the FTC’s Division of Privacy and Identity Protection, Kuehn is responsible for enforcing the regulations and educating finance sources and consumers to help prevent fraud.

“In the mortgage context, we’ve seen how misrepresentation can sour the relationship between the customer and the original creditor,” Kuehn told F&I. “If dealers are using these lists, they must be mindful of Section 5 of the FTC Act, which bars unfair or deceptive practices.  That means no false statements, such as ‘Your lender has referred me to you,’ and you have to make sure your outreach people know the ground rules.”

Lawrence Murray, COO of San Diego-based Virtual Lending Source, says his company’s trigger leads program comes with built-in compliance measures.

“You have to be in a position to make a firm offer of credit,” Murray says. “We prefer to make that offer ourselves, by mail. If the dealer only wants the leads, we’ll provide them, but they can only call as representatives of VLS. That means we have an agreement in place, firm instructions and scripts for the phone calls.”

Pro: Trigger leads are affordable.

The cost varies by provider and quantity, but trigger leads are well within the range of affordability for most marketing budgets. When purchased in bulk, trigger leads can run as low as a few dollars apiece. That doesn’t include the cost of time for cold calls and mailers, but Long says the response rate for trigger-lead mailers tends to outperform most other campaigns.

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