TrueCar's new CEO says top goal is mending Dealer Relations

[XDCX]

A news report indicates TrueCar's new CEO, Chip Perry, says the top goal for the company is to mend ties with their dealers.

For a link to a report from Bloomberg - click here

Chip Perry was the first employee hired at AutoTrader.com when the company was formed in 1997 and built the company to become the leader in automotive Internet advertising with $1.5 Billion in annual revenue.

The report indicated that AutoNation dropped TrueCar because the company objected to providing TrueCar all of the information they required to be part of the program. Chip Perry indicated that talking to AutoNation's CEO, Mike Jackson, was one of the first dealer contact he hoped to make.

Is there a place in the car business for a company like TrueCar or is it just another effort to get between the customer and the dealer and try to squeeze some profit out of the middle?

[mryan55]

Only time will tell how this works out. We oblige and provide a lot of info to TrueCar, but at what time is all of this info not worth the incremental sales we gain and the $300-$400/unit fees we must pay for selling the TrueCar prospect?

[XDCX]

Originally Posted by mryan55

Only time will tell how this works out. We oblige and provide a lot of info to TrueCar, but at what time is all of this info not worth the incremental sales we gain and the $300-$400/unit fees we must pay for selling the TrueCar prospect?

Given the ever declining gross profits on new cars the $300-$400 fee that TrueCar is charging seems high.

Additionally, all of the data the TrueCar collects seems to be shared with the public in an effort to generate publicity for the company. TrueCar was mentioned as a source when Automotive News estimated what various OEMs were spending on incentives.

It appears that Wall Street isn't 100% sold on TrueCar either - TrueCar's stock has dropped by 68% over the first 11 months of the year.

[mryan55]

FCA was one of the first to start targeting TrueCar prospects with targeted offers... on some vehicles it's $2,000 (Fiat only, I think) and I have seen $1,000 a few times with our clients here. It shows up as a TDM... I am sure that FCA is paying some type of fee to TrueCar for the exposure on top the $300 that comes from the dealership for a new car sale.

At the end of the day it's a win-win for TrueCar.

Dealers have been largely supportive of TrueCar, surprisingly... and I hear more concerns from dealers about the level of DMS access they require than the fees they charge.

Between our franchises and TrueCar inventory listings and sales records we have no less than 40-50 exports that TrueCar gets on a daily basis.

[XDCX]

Originally Posted by mryan55

FCA was one of the first to start targeting TrueCar prospects with targeted offers... on some vehicles it's $2,000 (Fiat only, I think) and I have seen $1,000 a few times with our clients here. It shows up as a TDM... I am sure that FCA is paying some type of fee to TrueCar for the exposure on top the $300 that comes from the dealership for a new car sale.

At the end of the day it's a win-win for TrueCar.

Wow, that's kind of crazy when you think about it - both the OEM and the Dealer are paying a third party to get in the middle of their transaction with a retail customer. Even worse, the third party's business plan is to create consumer demand for their service by narrowing the margin between Invoice and MSRP as much as possible.

I think it's interesting that AutoNation decided to drop TrueCar - I wonder what their primary objection was?

Originally Posted by mryan55

Dealers have been largely supportive of TrueCar, surprisingly... and I hear more concerns from dealers about the level of DMS access they require than the fees they charge.

Between our franchises and TrueCar inventory listings and sales records we have no less than 40-50 exports that TrueCar gets on a daily basis.

It would be interesting to see if there is a correlation between dealer participation for a particular brand of vehicle and stair-step incentives. I'd be willing to bet that OEMs that use stair-step and retro incentives are more likely to have dealers sign-up with TrueCar than OEMs that don't use stair-step and retro incentives.

Concerning the data that TrueCar gathers I can understand the concerns of the dealers. I'm guessing that TrueCar will continue to solicit the customers who bought from one of their member stores even if the store ends up dropping TrueCar - they'll just want to send the customer to another dealer when it comes time for them to buy their next vehicle.

[mryan55]

The whole business model does seem kind of crazy, but evidently it is working on some level, even if the stock market is none too impressed yet.

If I remember the stories from a few months back when AutoNation dropped TrueCar it was something the lines of "AutoNation believes we can offer an adequate value to our customers without having a middleman..."

[XDCX]

Originally Posted by mryan55

The whole business model does seem kind of crazy, but evidently it is working on some level, even if the stock market is none too impressed yet.

If I remember the stories from a few months back when AutoNation dropped TrueCar it was something the lines of "AutoNation believes we can offer an adequate value to our customers without having a middleman..."

Thanks for the information.

I wonder if TrueCar will offer AutoNation a special deal to get them back on the program? Two-tier pricing works so well for the OEMs I guess it wouldn't be a huge surprise to see a vendor use the concept too.

Maybe I'm a born skeptic, but if new car margins continue to drop won't there be a point in time that a company like TrueCar won't be able to garner a better deal than a customer could negotiate on their own?

Additionally, what about the trade value, financing, service contracts, etc. Is TrueCar going to negotiate those variables for the customer one day or will they limit their reach just to the price of the new vehicle?

[mryan55]

As far as our example and in the Metro Indianapolis market, the time has already come where it is certainly possible to negotiate the same deal, sometimes even better than TrueCar, without having to lift a finger and go on the TrueCar website.

The margins are already to the point where I'm better off being $400 to $500 below what I list on TrueCar for and sell a vehicle out of stock via a phone up or traditional non-TrueCar internet lead. That customer at least knows our inventory and didn't build a right-hand drive Wrangler with smokers package and slushmats beacause it was $500 cheaper than a regular 24S package... and then they argue about getting the 24S for the same price because we were misleading on TrueCar.

TrueCar builds mistrust in dealerships while they are also misinforming customers. Some local dealers here are advertising that there is "No need for TrueCar discounts here... we provide the best price possible and there are no behind the scenes fees like other dealers pay TrueCar..."

I haven't hopped on that bandwagon yet, even though I would like to, simply because although we act like TrueCar is a huge thorn in the side of our businesses, I don't think that their brand is strong enough that the average consumer seeing a dealership TV commercial knows what it is.

[XDCX]

Originally Posted by mryan55

I haven't hopped on that bandwagon yet, even though I would like to, simply because although we act like TrueCar is a huge thorn in the side of our businesses, I don't think that their brand is strong enough that the average consumer seeing a dealership TV commercial knows what it is.

I agree 100%.

In fact even when I'm watching a TV commercial for TrueCar I'm not sure that most customers would understand what their business model is let alone remember their brand name.

Spending your ad dollars to advertise against TrueCar would probably do little other than to help establish the TrueCar brand to customers who had never heard of it.

[XDCX]

Originally Posted by mryan55

If I remember the stories from a few months back when AutoNation dropped TrueCar it was something the lines of "AutoNation believes we can offer an adequate value to our customers without having a middleman..."

I did a little digging and found this article - it's a great read - click here

Apparently TrueCar was demanding that AutoNation provide them with access to all of their retail car deal data - regardless of whether the sale was a result of a TrueCar lead.

AutoNation contended that TrueCar leads only made up about 3% of their volume and they were not willing to provide 97% of their remaining car deals to TrueCar so TrueCar could do a data search to determine if they missed a billable customer.

Further, Mike Jackson didn't see any merits in continuing to fund a business that will likely become a competitor in the future. Jackson indicated he believes TrueCar has plans to inject their business into the F&I and trade assessment portion of future car deals - leaving very little room for a dealer to make any profit.

Perhaps most interesting to me was the indication that it was Scott Painter from TrueCar who was playing hard ball with AutoNation - maybe the loss of AutoNation helps explain why Painter got the boot....

[XDCX]

I read a story in Automotive News indicating that TrueCar has been successful in getting four out of five existing lawsuits that had been filed against the company dismissed.

While that's clearly great news for TrueCar the report noted that one of the cases that was dismissed will likely be refiled - that's the case that was filed by the California New Car Dealers Association that seeks clarification on whether TrueCar is operating as a broker.

The other case that remains has been filed on behalf of non-TrueCar dealers who contend that TrueCar's advertising is deceptive because it suggests that shoppers who buy from a TrueCar dealer pay a lower price.

[DealerLaw.com]

The Federal Court in NY just issued a decision in favor of over 300 dealers who don't use TrueCar allowing our case to proceed. Truecar had filed a motion to dismiss. It is a false advertising case claiming that TrueCar deceives consumers with a false and deceptive "no negotiation" promise when all consumers are indeed required to negotiate. Truecar sought to dismiss the case on the basis of a hidden disclaimer on its website which states "ultimate price must be negotiated with the dealer". The Court said "nice try". If a dealer loses 7 deals a month to Truecar dealers, the recoverable damages exceed $1Million. We have a short window to add other non-subscribing dealers to the case (or file a second case). AutoDealer Magazine and F&I Showroom will be publishing articles on the court decision. Regards to all, Len Bellavia

[XDCX]

Originally Posted by DealerLaw.com

The Federal Court in NY just issued a decision in favor of over 300 dealers who don't use TrueCar allowing our case to proceed. Truecar had filed a motion to dismiss. It is a false advertising case claiming that TrueCar deceives consumers with a false and deceptive "no negotiation" promise when all consumers are indeed required to negotiate. Truecar sought to dismiss the case on the basis of a hidden disclaimer on its website which states "ultimate price must be negotiated with the dealer". The Court said "nice try". If a dealer loses 7 deals a month to Truecar dealers, the recoverable damages exceed $1Million. We have a short window to add other non-subscribing dealers to the case (or file a second case). AutoDealer Magazine and F&I Showroom will be publishing articles on the court decision. Regards to all, Len Bellavia

Len,

Thanks for the update.

Just to be clear, it's my understanding that your case is for dealers who did not use TrueCar and the claim is those dealers were hurt by false advertising which suggested customers who used TrueCar would experience a "no negotiation" sale.

Additionally, DealerLaw.com still has a short window to add dealers to the existing case if they did not use the TrueCar service.

Please correct my comments if they're incorrect and thanks again for the update.

[mryan55]

It will be interesting to see how this plays out. I have been a Zag/TrueCar customer since 2010 but as I have said I am not saying the TrueCar is the way forward, but it is definitely a source of incremental sales. Every little count helps when fighting to hit volume incentive numbers.

[XDCX]

Originally Posted by mryan55

It will be interesting to see how this plays out. I have been a Zag/TrueCar customer since 2010 but as I have said I am not saying the TrueCar is the way forward, but it is definitely a source of incremental sales. Every little count helps when fighting to hit volume incentive numbers.

As I mentioned in an above post, it would be interesting to know if TrueCar has a higher participation rate with brands that historically have relied on retro and stair-step incentives. My bet is there's a strong correlation.