Detroit Trading Co. Builds Marketplace for Auto Finance Leads, Including Subprime
ROYAL OAK, Mich. — Detroit Trading Exchange was created to serve as an independent marketplace, along the lines of a virtual Wall Street, to provide an infrastructure for companies and dealers to buy and sell all sorts of auto leads, such as subprime.
After working with Car.com, which was sold to Autobytel in 2004, Pete Bonner, Don Campbell and John Campbell joined together to found the Detroit Trading Co., which runs Detroit Trading Exchange. The executives said they designed the exchange to ease the process of buying and selling Internet-generated leads.
According to Bonner, vice president and director of sales, the exchange currently handles close to 25 percent, or about 250,000 sold leads a month, of the overall volume of auto finance leads generated on the Web.
"The leads are actually consumers who fill in a mini application for credit in hopes of being financed for a car," Bonner explained in a recent interview with SubPrime Auto Finance News.
"Our sellers on Detroit Trading Exchange are consumer-facing Web sites that host an auto finance form (such as an online loan site or financial institution site). Our buyers range from banks to lead aggregators that either have an interest in direct-to-consumer lending or have a dealership network assigned to buy leads from them," he added.
How Exactly Does It Work?
As many may suspect, the exchange process begins when a generator sends a lead to the company to sell. The site notifies buyers of leads about the respective ZIP codes and allows buyers to respond with their current pricing.
"Participants have total control over the parties with whom they wish to do business through their respective exchange controls," company officials highlighted.
Additionally, clearinghouse functions can be covered, which includes invoicing buyers and the collection and disbursement of funds, officials said.
Gathering Subprime Leads
According to Bonner, the Internet is playing a greater role each year as more credit-challenged consumers are going online to research their auto financing options and review their possible avenues. Many banks, institutions and other organizations working in the subprime auto sector have sites that offer sections inviting consumers to fill out an application.
This is where Detroit Trading Exchange comes in, Bonner said. "What you should understand about us is that we sit in a very unique position within this industry. We don't face consumers, and we don't face dealers. We don't buy or sell leads. What we do is allow those consumer-facing sites to efficiently sell their commodities, or leads, at market to buyers.
"The buyers in our system openly bid on the leads based on their own market demand (if they have a dealer signed on for the ZIP code where a lead is from). What we have created is a commodities exchange for the trade of auto finance leads," he continued.
He highlighted the importance the exchange can play for subprime auto lead generators and those looking for such prospects.
"The special finance leads market demand is huge and getting bigger," Bonner reported to SubPrime Auto Finance News. "This speaks to two key points: Consumer credit is getting worse, so the Internet allows them to consult multiple banks, dealers and sites to try to obtain financing versus going into the bank and getting turned down.
"Dealer demand for these leads has grown because of the information which is supplied on the consumer and process in which a finance lead is handled versus let's say a new-car lead," he added.
"A finance lead is basically an application for auto financing by the consumer who has given the dealer a green light to pull credit report, etc. This type of consumer is much more serious to the dealer than someone looking for a price quote," he said.
"If a dealer can obtain financing for the consumer, they are as good as done," he went on to say. "Not to mention, subprime finance leads generally turn into a used-car sale, which brings in more profits for a dealer than a new-car sale."
Bonner also said the company is in the process of creating a bank-to-bank exchange, where banks can buy and sell auto finance turndowns to other banks which may be able to fund the deal.
"This will be an exchange where banks can buy and sell auto finance turndowns to other banks (full applications with attached mid-score)," Bonner told SubPrime Auto Finance News. "This provides banks interested in direct-to-consumer lending a central and secure place to buy consumer applications that meet their lending criteria and sell applications that don't, all through one technical point.
"The key is that the participating banks don't have to go out and advertise to consumers that they hope meet their lending criteria, they can come here and know in advance that they are getting only those consumers that do meet their criteria every time. It's really very powerful from this perspective," he explained.
Behind the Scenes
To keep the online marketplace running efficiently, Bonner said the company has formed three key services — relationship management, accounting services and IT initiatives. Moreover, the exchange has set certain principles in place to establish ground rules for trading on the site — uniform rules of trading, dynamic pricing and liquidity.
One of the top factors for the company is relationship management, executives pointed out.
"Nothing requires more time, energy and expertise than building quality business relationships," officials said. "The problem is that there are only so many hours in a day. Chances are you could take advantage of yet more business opportunities if only you had more selling resources.
"Our salespeople have expert industry knowledge and keen people skills that can augment your own efforts in building more and better business relationships," executives added. "While we play the role of matchmaker, our greater role is the daily grind of dealing with issues that naturally come up in any relationship and resolving them in a timely manner."
As for accounting services, the company said it maintains a record of all leads purchased and generated as a Lead Count and Revenue Report, which is compiled at the end of each month. A copy of this report is sent to both buyers and generators with their respective invoices and generator reports.
"Monthly statements show all transactions for the month and the amount each customer owes and is owed," officials said. "Detroit Trading also serves the function of collecting and disbursing funds. This service virtually eliminates the generator's collection efforts. And buyers like the simplicity of making a single payment."
Discussing the exchange's IT initiatives, executives said the company has combined DT Agent with DT Bridge to simplify PingTree Automation and enable broadcast pinging.
"As a single connection point between generators and buyers, DT Bridge saves you potentially hundreds of hours of programming time and weeks of delay in transacting business," executives explained. "More importantly, DT Bridge expands your market opportunities."
To further streamline the trading process, Detroit Trading Exchange said it implemented uniform rules of trading. These rules consist of an agreement among all parties doing business on the virtual marketplace, governing all trades.
According to officials, "A key provision of this agreement is ‘at will trading,' which provides a practical remedy to many business issues and greatly simplifies the agreement. The uniform rules of trading enables all buyers and sellers to have immediate trading access with each other. And, as new generators become exchange participants, buyers will automatically have access to these new sources of leads," executives noted.
Meanwhile, Bonner said the company also provides dynamic pricing, which, in essence, enables buyers to change their pricing at any time based on current market conditions instead of being forced to rely on private trade agreements.
"Buyers are assured the supply of leads they need and generators are paid market prices," executives said.
Touching on liquidity, officials said this feature means the exchange covers the "breadth and depth of the market."
More specifically, "Breadth in terms of coverage, or ZIP codes, and depth in terms of lead volume," executives said.
To learn more about the company, call (248) 542-5111, or visit www.detroittradingexchange.com.