TrueCar.com Stirs Industry Debate


SANTA MONICA, Calif. - 

In an industry known for its outspokenness, a new business model has taken front and center as new cause for debate — TrueCar.com. And Scott Painter, company founder, has addressed this head on in the form of an open letter to the automotive community.

TrueCar, which recently signed an exclusive deal with Yahoo Autos, as well as rolling out a national advertising campaign and ClearBook 2.0, boasts it can save consumers money by helping them find the lowest price on a new or used vehicle online. Its dealer partners set the online prices and then pay for a consumer lead only if a vehicle is sold.

The company relies on a variety of sources to provide consumers with additional data, including from DMVs to insurers to DMS providers and more.

Some dealers contend that giving all this information to consumers is forcing them to go lower on price than they would like, thus eating into profit potential and hurting business. They appear to believe TrueCar is giving up too much information.

Discussing the revamped ClearBook with Auto Remarketing earlier this month, Painter said this tool can break down used values to the ZIP code level.

Painter explained, “One in every three introductions to the dealer buys a car. We see ClearBook 2.0 as a huge time savings. We help customers be confident and informed, which means more likely to buy. We are not trying to do this at the expense of the dealer. We just want to show the facts.

“We want to offer enough depth of data and transaction data to give a very accurate picture to the buyers and sellers of cars, so they know what they should pay and what a car could ultimately sell for. We’re very excited about our data. We are looking to reflect the market," he added. 

While TrueCar has recently gone national with its business plan, the idea has been around longer. Prior to announcing TrueCar, the entrepreneur behind it launched Zag. This platform powers online and mobile car buying programs for more than 40 prominent membership-based organizations, including USAA, AAA and others. Dealers have been involved with this program for several years.

However, not all dealers are in support and those who are not are very outspoken. In an effort to address these concerns, Painter issued this open letter to the industry on Monday:

"Our world is changing. Unprecedented access to information and a massive shift in consumer behavior has resulted in a challenging new automotive retail landscape. It has also enabled a consumer appetite for data transparency. To hide from evolving consumer behavior is to deny change. At TrueCar, we embrace this opportunity. We also believe that transparency is the centerpiece of trusting relationships. Some in the industry disagree. We would like to make our position clear.

"Our goal at TrueCar is to foster healthier relationships between manufacturers, dealers and consumers through data transparency. To deliver on this promise, we require a high standard from our 5,800 dealer partners – an upfront competitive price and a commitment to a great customer experience. A discoverable upfront price is the cost of getting noticed. Contrary to popular concerns this does not create a “race to the bottom.” The lowest price only secures the sale 19.2% of the time within the TrueCar network. The sale is still won by location, selection and good old-fashioned customer service.

"At TrueCar, we believe that upfront price is at the core of a good buying experience for dealer and consumer. Informed consumers buy more confidently and are more satisfied. At TrueCar, we publish the most accurate reflection of the retail market that has ever been available. The goal is to establish an objective, credible and transparent baseline for fairness – both for the customer and the dealer. That being said, TrueCar does not set this market. Our dealer partners set their own prices 100% of the time.

"Dealers earn their business every day and we believe that their marketing programs should too. TrueCar is the only fully accountable source of new business where our dealer partners only pay when they sell a car. Gone are the days when dealers have to assume all of the marketing risk and pay for advertising and for leads as a primary way to secure new customers.

"TrueCar requires DMS integration for tracking of this accountable model, the core of what makes us unique. We use DMS feeds from our dealer partners for tracking and optimization of introductions made to the dealership. We don’t use our dealer partners’ information to populate the TrueCar pricing curve. That information comes from entirely separate sources of anonymized data that represent nearly 90% of all vehicle transactions in the U.S.

"At TrueCar, data integrity, security and privacy are job #1. Our policies, systems and technology have passed the scrutiny of partners like USAA, Consumer Reports, American Express, AAA and many others. TrueCar has never, and will never, sell or repurpose DMS data for any reason.

"In spite of all this, we recognize that change is threatening for some. Ours will always be a high-touch industry. The service of our dealer partners and highly-trained sales professionals becomes increasingly important the more consumers know. At TrueCar, our commitment is to relieve those professionals from needing to resort to high-pressure sales tactics or misdirection. These tactics have been an albatross for our industry and they are at the heart of why consumers have become generally mistrustful of the car shopping experience in the first place.

"Is TrueCar good for all dealers? There will always be those that resist change. To our dealer partners, we applaud your understanding that truth, transparency, and customer service is at the center of success in our changing market. And, to those that still have questions, we invite an open dialogue. One of the great virtues of transparency is that we have nothing to hide.

—Scott Painter, founder and chief executive officer.

To read Auto Remarketing’s article on the launch of ClearBook 2.0 and the Yahoo Autos deal, click here.

To see Painter's letter, as well as industry response, click here.

Comments

Jennifer,
There is a raging debate on the Automotive Digital Marketing blog about TrueCar. It covers a lot of ground on how TrueCar uses leads, the legal implications of publishing the "lowest price offer", and Scott Painter's speech where he talked about getting rid of auto sales people. If you write another article on TrueCar, I believe researching these points will make better journalism.
http://www.automotivedigitalmarketing.com/forum/topics/dear-autobytel-de...

I'm interested in reading more of the discussion...what are the key points from each side of this argument? I understand other dealers are amped-up about this...but I also know consumers who see the value in having this information...who's right?

This is a HUGE issue. It is absolutely driving prices and margins down but it is the dealers fault. You do not have to subscribe to Zag or True Car and dealers should do everything in theri power to block the use of their transaction data. Without it, these companies fail. Dealers are their own worst enemies and the people at Zag and True Car know it. The manufacturers don't care because it sells cars. They do not care if the dealer makes money or not, they just want the volume. Many times the $299 paid to Zag iis more then the dealership makes on the vehicle. Ultimately the consumker suffers. If the dealer cannot make money they cannot afford to service the customer appropriately. Why would a salesperon spend hours with a customer to make nothing on the car? What possible incentive is there for a dealer to take care of a customer when they do not make any money? And don't say the dealer makes it in service because the manufacturers pay little for warranty hours, the insurance companies regulate the amount for body and paint and most cars sold today really need little to no maintenance. Consumers will always get the best deal going directly to the dealer without the middleman. Just like health care, it will ultimately just raise the cost to consumers.

Our dealer group has been on this program for about 4 years and we have had some success with it. This was all up until ZAG unleashed it's TrueCar program. Sales from the Zag program have always accounted for about 10-12% of our monthly new car volume. We never made much money on these vehicles but we treated them as incremental sales.

Due to laws in our state Zag is not allowed to charge us per sale ($299). They have to charge us based on the estimated number of leads (introductions). When we were paying about $600 - $700 per month it made sense to be on the program. Since TrueCar's launch they have however been steadily increasing their monthly fee to the point where now they are looking for as much $4,000 per month.

This is now costing us about $800 per sale and our average profit (before accounting for Zags charges) is under $300 per vehicle on this program. Yes it's true that we price our vehicles not Zag. However, if Zag determines your price is too high they will not show your dealership to perspective buyers. They will simply by-pass you and show them the lowest priced dealers. This forces you to have to be on par with the lowest priced dealer to have any shot.

If we were paying $299 per sale it might still be worth it but their per month pricing has gone way out of control.

Ultimately as a dealer you have to understand that Zag does not have your best interest at hand. They are only interested in proving the customer with the lowest price possible. By designing a program that encourages dealers to get in fierce competition they are very good at doing this. This program fully favors the customers with little regard for dealers making any money. This is why we ultimately dropped them.

All this coming from a dealership that believes in volume and is very aggressive with online pricing. If we are not losing money on a deal we will typically make it.

Even we think TrueCar/Zag takes it too far. Keep this in mind, our manufacturer does not even allow us to advertise our prices as low as you have to go on TrueCar/Zag to be competitive.

If your dealership routinely loses $500 -$1,000 per new car sale then this program might be perfect for you. If you can't afford to do that then my best advice is to stay away.

There are no secrets in anything today with a stroke of your finger on a small 2-3 inch cell phone, zag & truecar are not concerened with the consumer but rather their gross monthly fees. That's just business & bad business for dealers. It seams a bit like back dooring the Sherman antitrust act of price fixing. If they publish a price for a specific vehicle the obviously a competative dealer will match it thus creating a fixed price. Ok no two used cars are the same phew that was a close one, but who are these experts telling the automotive industry how much they should make or sell a vehicle. The market will dictate that very quickly. I have a 3x5 index card with all the "experts and market makers" phone numbers on it. When a customer tells me so & so say thats how much it's worth, I give them a card & tell them to call and buy it from them! Dah,,, we all know they don't sell cars and in this unique good inventory shortage really have no clue of the prices we need to pay on the block rather than some historical mathematical program.

Where have all the "ONE-PRICE" lots gone, that's right, GONE. True cars just muddies the water,but as Ziegler said, call those people who say that's what your vehicle is worth and have them write the check. True will not last,slowly dealers will figure out its not helping,and they will ditch it just like ONE- PRICE. Miss the old days when there was some room to make a profit. Shame on the guy who gave our cost to everybody,go to SEARS and ask the cost of a refrigerator before you try and buy it, GOOD LUCK WITH THAT!!!!!!!!!!!!!!!!!!!

Let me make sure I understand this clearly. ZAG/True Car does not manufacture the vehicle people purchase. They do not meet the consumer face to face to ensure that nothing is overlooked or missed during their vehicle purchase process. They do not help consumers after the purchase is consummated by explaining the advance technologies or providing owner clinics and service after the sale. They do however charge a dealer $299 or $399 to sell something they didn't manufacture to someone they will never meet. WOW! Really? ZAG exists because they have taken the time to gather the information and present it in a great format. That information already exists online if you know where to look, they have just made it easy.

Consumers should take the time to find the information without solely using ZAG and have the $299/$399 passed onto them directly. Take a few minutes to search online without providing your private information to ZAG and having your inbox and phone bombarded by everyone they sell/share your information with.

Scott Painter uses words like “a change is threatening for some dealers” and “we don’t use our dealer partners’ information to populate the TrueCar pricing curve.” Are you serious! If he is all for change, adjust the business model to find out the TrueValue of his TrueCar information and charge the customer $300-$400 upfront. The information that he so willingly wants to sell them before they purchase the car may then not be so valuable. I would be willing to bet that prospects wouldn’t even pay $50 for this!

I love how Scott Painter portrays himself to be this nicey, nicey person who only cares about the consumer and their wellbeing. What a crock. Change your business model to be compliant with ALL 50 states and get licensed by the Motor Vehicle Administrations in the States where you are going to do business. Dealers who have invested millions into their brick and motor stores as the manufacturers require follow all of the rules and regulations and there are lots of them.

I have ended my relationship with TrueCar and have turned off the data feed. So should you!! End your predatory half way tactics TrueCar or get into the car business like the rest of us. Your finished TrueCar!

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