New TrueCar Policy Raises Questions
September 10, 2013
SANTA MONICA, Calif. — Scott Painter, CEO of TrueCar, responded this week to criticisms of the company’s new dealer policy, which took effect last week. It calls for dealers to pay for every TrueCar user who purchases or leases a vehicle at the dealership — unless that customer meets specific exemptions.
The new policy was examined by Joe Webb in late August. The founder and president of DealerKnows took to his company’s blog and wrote that “things may be taking a turn for the worst [for both TrueCar and participating dealers].”
“My dealers … all seem to have significant success with TrueCar opportunities,” Webb acknowledged. “However, there were questionable changes that frequently popped up. In most instances, TrueCar relented and maintained that the ‘customer is always right.’ In this case, their customer is the dealer. That is about to change.”
Previously, there was no write-off policy in place, which TrueCar’s Painter said a small percentage of dealers — less than 100 of the company’s 6,500-dealer network — “have been extraordinarily abusive of.”
“The need for a policy is to prevent obviously flagrant behavior,” he told F&I and Showroom. “Having a written policy gives us something to be very clear about.”
Under the policy, dealers can still request full write-offs if the customer contact submission information and a matched sale were not affiliated, or the vehicle transaction was unwound or cancelled. Partial write-offs are also a possibility in a number of situations.
“Having a policy doesn't change the fact that we have a phone number and we have a relationship with our dealers that is a partnership,” Painter said. “If a dealer has a problem, we will always listen.”
Andrew DiFeo, general manager at Hyundai of St. Augustine, and a member of the TrueCar National Dealer Council, added that dealers who are considering dropping the service because of the new policy might be doing themselves a disservice. “Once that business is gone, and they don't get it back, [those dealers] might be calling TrueCar up and saying, ‘Hey can we sign up on the program again?’” he told F&I and Showroom.
DiFeo said TrueCar delivers the dealership’s highest return on investment among its other marketing channels, in part because the dealership only has to pay for the cars it sells instead of for every lead.
In some states, TrueCar operates as a subscription service, but in most cases it operates on a pay-per-sale model in which dealers pay $299 and $399 for every new and used vehicle sold, respectively. Painter said the company sees more than 40,000 customers a month and generates $100 million in revenue, bouncing back from a regulatory crackdown on its advertising practices early last year.
“We're a better company for having been through [the crackdown],” Painter said. “It was never possible to say with absolute clarity before now that we comply with every interpretation of every law —and today we can say that.”
Like his company’s compliance efforts, Painter said the new write-off policy is part of growing up. “[TrueCar] is a large business, and large businesses have policies and procedures … and I think the fact that we haven't had [a write-off policy] is probably the more curious thing than the notion of having one.
“Philosophically, TrueCar does not want to get paid for anything that does not result in a sale because of our efforts.”