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New TrueCar Policy Raises Questions

September 10, 2013

By Brittany-Marie Swanson

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.”

Comments

  1. 1. Ryan [ September 10, 2013 @ 01:38PM ]

    Gotta love a service that charges dealers $300 for telling a customer to not pay a profit margin for the product.

  2. 2. Dave B [ September 10, 2013 @ 05:55PM ]

    We average $800 profit (front) per new car through TruCar.
    Its all about knowing the market and maximizing opportunity to make money while still making it a benefit to the customers.
    My store had 188 TruCar leads last month and we closed them at 17% We grossed $44k with finance. To spend $9600 and get $44k is a no brainer. The customers are more educated buyers, very little haggling and the average days to sale from lead is 6 days over the last 90 days of leads. Well worth the spend for sure.

  3. 3. Chuck [ September 12, 2013 @ 12:53PM ]

    I find it unfair when a loyal customer who had purchased many cars at my dealership uses the service because they hear or see the true car advertising , now I have to pay to sell my own customer a car.

  4. 4. Chuck [ September 12, 2013 @ 12:54PM ]

    I find it unfair when a loyal customer who had purchased many cars at my dealership uses the service because they hear or see the true car advertising , now I have to pay to sell my own customer a car.

  5. 5. Justin Brady [ September 12, 2013 @ 01:13PM ]

    Dave B obviously doesn't know his TRUE cost to sell a car. $1375 worth of cancel-able products doesn't cover the overhead let alone the variable and fix. our best dealer in our 20 group has a cost to sell a car at over $1700. Dave B is losing money or not making a fair profit with the risks of running a dealership. it's a race to the bottom and why we would let a vulture like TRUCAR into our business is besides me

  6. 6. TommyD [ September 12, 2013 @ 01:20PM ]

    Don't know what TrueCar service you are using, but I pay a flat monthly fee, regardless of how many I sell. It is against the law to broker or arrainge deals in Oklahoma. Pay per Sale is brokering. As far as profit goes, we run about $2k a copy on TrueCar deals. We sell Buick and GMC. There is never a time that I have to sell a car. I can always pass on the deal and let them walk. TrueCar does not hold a gun to my head and tell me I have to sell. I set the price I'm willing to offer. I set the value of the trade-in. I am responsible for my store's success. If you want to let TrueCar run your new car department, good luck with that.

  7. 7. Glenn Clark [ September 12, 2013 @ 01:25PM ]

    I agree with Justin. Using Dave B's numbers, 32 sales at $44,000 gross that cost $9600 to generate leaves $1075 net before any other expenses. That's a recipe for disaster. Wake up, True Car is not a dealers friend.

  8. 8. Jana [ September 12, 2013 @ 01:31PM ]

    The only thing TrueCar did was put dealers in a bidding war and then tell me every 60 days that I need to change my prices! When we signed on to TrueCar we only had 3 dealers within a 200 mile radius that we were signed on with them and now there are 11. If I was to beat everyone's deal on a car through TrueCar I would have to be below triple net! I don't feel that I should have to pay TrueCar for a customer that I have talked to the night before or one that is sitting in my showroom and playing on his phone while the salesman is getting his car appraised. If I already have talked to the customer then why should I pay TrueCar and cut my profits to make it in line with TrueCar pricing? We ended our relationship with them this month because they told me they write off 67% of our invoices. I said well, maybe other dealers don't have a great CRM tool that time stamps every activitiy on that customer to prove that we already had them as a customer.

  9. 9. steve [ September 12, 2013 @ 01:36PM ]

    My problem with Truecar is that the customer comes in to the dealership half cocked because they do not use a VIN # for pricing. They quote them base vehicles and the customer does not understand...so it sets you up for confrontation. What a schlock organization

  10. 10. Orlando [ September 12, 2013 @ 05:57PM ]

    I agree truecar is what's all wrong about the business. They make money for doing nothing other than starting bidding wars on incorrect pricing for the vehicle with options. Why should these vultures make more than my salesperson?

  11. 11. Steve [ September 14, 2013 @ 08:26AM ]

    Dave B, please you share how you are able to charge the customer more than the price TrueCar is quoting?

  12. 12. Cisco [ September 16, 2013 @ 03:16PM ]

    In the end, the dealer sets the TrueCar price. It's up to you to decide what profit margin you want. TrueCar can be a great tool to increase volume.

  13. 13. Gustavo [ October 09, 2013 @ 05:39PM ]

    I think the TrueCar should grab a partner similar to Sellyourcarin10minutes.com to complete their progressive business model. From what I understand he has a trademark in adding speed to the what Carmax does with their strong purchasing of Used Cars that people want to dispose of. TrueCar Is trying very hard to be the 'white knight' in the industry.

  14. 14. George [ October 11, 2013 @ 07:46AM ]

    Wow!!! $399 for a new car that's almost 3x what a salesman gets for those mini- deals. True Car should be ashamed. They are basically in the middle using info that is out there for the public anyway and no one wins except True car and Killing salesman all over America. I mean maybe $75-$100 maybe! But $399 is really absolutely insane. This is news to me and now I see why Dealerships are doing what they have to do in ref. to paying the salespeople on these deals, again Wow!!!!!

  15. 15. George [ October 11, 2013 @ 07:46AM ]

    Wow!!! $399 for a new car that's almost 3x what a salesman gets for those mini- deals. True Car should be ashamed. They are basically in the middle using info that is out there for the public anyway and no one wins except True car and Killing salesman all over America. I mean maybe $75-$100 maybe! But $399 is really absolutely insane. This is news to me and now I see why Dealerships are doing what they have to do in ref. to paying the salespeople on these deals, again Wow!!!!!

  16. 16. mduff [ April 09, 2014 @ 03:32PM ]

    now they are going public and as soon as the founders are able they will dump the stock like they did in their first venture

 

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