By on January 16, 2012

We had been following the dark clouds, lawyers, and regulators circling over TrueCar for quite a while. Today, we were reminded to take another good look.

TrueCar says it is deeply sorry, and it will change the way it is doing business. Bowing to state regulators, TrueCar will change the way it discloses prices to car shopper. And it will change the way it charges dealers, Automotive News [sub] reports.

  • Where states prohibit bird-dogging (paying a bounty for a lead that turns into a sale,) TrueCar will charge dealers a subscription fee. At the moment, TrueCar gets $299 for every lead that triggers the sale of a new vehicle, and $399 when a used car is sold. TrueCar will change its billing model in possibly 20 of the 49 states in which it does business.
  • When states (like California) allow brokering, but require significant disclosures about the broker’s involvement, TrueCar will go to subscription fees.
  • To customers, discounts quoted will be off MSRP, not off invoice. Several states ban the term “invoice” in ads.
  • Because some manufacturers object to advertising below-invoice prices on public sites, TrueCar customers will have to create an account and log in.
    TrueCar will implement a dealer council for that represents the voice of the dealer.
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17 Comments on “TrueCar, With Guns To Its Head, Says Uncle. Will Change Business Model...”


  • avatar
    stuki

    Isn’t it nice to know, your friendly “public servant” regulator wants to make it as expensive as possible for you to buy a car, so that his boss’ campaign contributors can make some nice rent off of you?

  • avatar
    jacad

    What leads you to assume receiving a price through TrueCar is a lower price? The dealer pays 300 bucks for the business which means ultimately the buyer is paying. If the dealer can sell it using that model, would you not guess they can sell it for the same or a lower price when eliminating the $300? The gullibility of the public and desire of the webbies to believe anything they read on the INTERNET is astounding!

    Being a new car dealer requires a huge investment in inventory, buildings, equipment, training, and people. TrueCar thought they had found the keys to the Kingdom and could be a national dealer with a fraction of the cost and very little risk while representing all manufacturers. No value added, simply willing to convince people of what could be the ultimate lie. Buy it cheaper!

    • 0 avatar
      carguy

      jacad – TrueCar made it possible for buyers to collectively bargain with the car dealers and this leads to better prices. Unfortunately, the entrenched interests of the dealer associations and their friends in state governments put an end to that.

    • 0 avatar
      Dukeboy01

      jacad- That’s what I was thinking when news of TrueCar’s problems with state regulators started percolating a few months ago. It seemed to me that there has to be a way for a savvy car buyer to still do better.

      Do your own research and bring it with you. Ask to see the dealer’s actual invoice paperwork. And always be prepared to walk if the dealer starts to mess with you.

      The problem is that most people are non- confrontational to a fault. They don’t want to deal with the social discomfort of haggling with a salesman and are too meek to walk if the deal is bad. That’s why no- dicker stickers work.

      People don’t do any research. They worry about the monthly payment instead of the total cost of the car. And they don’t understand the concept of delayed gratification so they don’t want to spend weeks shopping for a better deal if the dealer has the exact car they want sitting in front of them.

      • 0 avatar
        kvndoom

        You described me to a point, right up until last year. I researched the hell out of the cars I wanted, resisted the terrible urge to rush into something, and spent most of 2 months before making a definite conclusion on what I was going to buy. But I will admit that I contacted dealers through TrueCar. Ironically, the best price I was quoted by email (and ultimately paid) was even *lower* than TrueCar’s best price. I was very happy with the service and I hope they can stay in business.

      • 0 avatar
        bikegoesbaa

        And they don’t understand the concept of delayed gratification so they don’t want to spend weeks shopping for a better deal if the dealer has the exact car they want sitting in front of them.

        Or, perhaps they understand the concept of delayed gratification; but they also understand that their free time has value, and conclude that paying a $300 premium for the right car right now is a better decision than spending “weeks” trying to hunt down a better deal that may or may not exist.

        Sure, a well-informed buyer who is willing to walk away can probably grind out a price lower than Truecar offers after hunting and haggling. The value of Truecar is that it allows a poorly-informed buyer who is less willing to bargain or walk to easily negotiate a price that is very close to what the well-informed wheeler-dealer can, rather than the hosing they would have gotten otherwise.

        Also, it allows a well-informed buyer who values their time and frustration to pay a small premium over what they *might* have paid in order to save themselves the trouble of hunting deals and beating up sales guys all over the place.

        I suspect that many “car guys” who fancy themselves hard negotiators don’t like Truecar because it allows a dopey sorority girl or some guy who doesn’t know a rocker arm from a rocking horse to basically get the same deal that they do without even getting off the couch.

      • 0 avatar
        Pch101

        I suspect that many “car guys” who fancy themselves hard negotiators don’t like Truecar because it allows a dopey sorority girl or some guy who doesn’t know a rocker arm from a rocking horse to basically get the same deal that they do without even getting off the couch.

        On the contrary, I would presume that they’re paying at least $300 more than I would.

        I would also presume that they would be able to save that money if they would just lose their fear of negotiation and learn how to do it properly. Most people could haggle just fine, but they talk themselves out of it, convincing themselves that it is either too difficult or time consuming, when neither is the case.

        The average five year old has learned to negotiate with his parents for a bit more dessert or a later bedtime, even though he really has no leverage at all. Yet this same kid will probably forget these life lessons when he reaches adulthood, even though he has far more leverage in a showroom than he ever did when he was a wee tyke. Most of the problems that people have with haggling are self inflicted, and can be unlearned.

      • 0 avatar
        bikegoesbaa

        On the contrary, I would presume that they’re paying at least $300 more than I would.

        $300 difference on a $20k+ purchase = “Basically the same deal”.

        I would also presume that they would be able to save that money if they would just lose their fear of negotiation and learn how to do it properly. Most people could haggle just fine, but they talk themselves out of it, convincing themselves that it is either too difficult or time consuming, when neither is the case.

        I enjoy the process of negotiating, and I love cars, so I think the old fashioned haggling method of car buying is great fun.

        However, I can certainly understand that other people do not, and I don’t blame them for using the Truecar service if it allows them to avoid something they regard as unpleasant or inconvenient for a nominal cost.

        It is not especially difficult or time consuming to mount and balance your own tires. Most people still choose to pay a premium to avoid doing it themselves. Is this unreasonable?

      • 0 avatar
        Pch101

        $300 difference on a $20k+ purchase = “Basically the same deal”.

        Note that I said “at least $300.” It could be more. If we accept what the poster below says about it, then it would have cost him $1,500.

        And for most people, $300 isn’t chicken feed. The average income of an employed male in the US is about $15.50 per hour. Even if you earn three or four times that amount, you could save several hours worth of salary with an hour of good negotiation.

        I can certainly understand that other people do not (want to negotiate)

        I don’t think that most of them don’t want to negotiate. They just don’t know how to do it, and are convinced that they can’t learn how. If they felt that they could do it well and knew how to do it easily, then they would feel better about it.

        Negotiation is a productive and useful skill that reaps dividends, and not just with car purchases. It’s not a task that is easily outsourced, so it pays to know how to do it yourself. If TrueCar can profit it from that lack of confidence, then so be it, but it’s a costly and unnecessary choice in many cases.

  • avatar
    foojoo

    I was thinking about using Truecar to purchase my new car about a month ago. I am glad I decided to do it my normal way, pitting several dealers against each other in a bid war, plus a bit of negotiating on the side. I got the car for a much lower price than Truecar’s lowest price. If Truecar is accurate, which I am skeptical, I bought the car for well under the dealer’s cost.

    I am glad that I didn’t use Truecar. If I did I would have paid about $1,500 more than I should have.

  • avatar
    jacad

    Actually, what is even more perplexing than the gullibility of the consumer is the stupidity of the dealer. There is not a new car dealer in America that could not write an article on how insidious this kind of arrangement is for their investment and future well-being. But no, their competitive juices kick in and they just have to sell one more car than the guy down the street even if they are losing money doing it.

    If you want proof they know better, look no further than the fact all the pressure on TrueCar is coming from dealer associations within the various states. Why did they choose to take a bite of the apple to begin with?

    Dealers have spent the last ten years buying Internet “leads” from these fly-by-nighters for around ten-dollars a pop. For that, they got two twelve year old kids with computers, three Wannabes without money or credit, five guys who live a thousand miles away, and one old lady in Florida who can’t remember if she wanted a car or not. And people are afraid of negotiations with these guys?

  • avatar
    LeMansteve

    In what other industries do buyers and sellers fixate so much on discounts relative to arbitrary points like invoice and msrp? Does something magical happen if you manage to buy a car below “invoice”? Who cares how much the dealer paid for the car?

  • avatar
    hriehl1

    Just call me a happy TrueCar user. They saved me $400+/- on a sub-$20K car plus hours of shopping & negotiating. Here’s a real-world example of a car I bought 10 days ago through TrueCar.

    Mazda5 Sport Manual 6-speed (yes, I’m the guy who wants a minivan with a stick);
    No options or accessories
    No Trade-In
    No Financing, Cash Deal
    MSRP: $19,345
    Destination: $795
    Total MSRP: $20,140

    Invoice: $18,100
    Destination: $795
    Total Base Cost: $18,895

    Other Price Reducers:
    Factory-to-Buyer incentive: $0
    Factory-to-Dealer incentive: $1,000
    Holdback: $275

    Knowing these figures (Consumer Reports, Edmunds) would have led me to make a first offer of $17,700 (out-the-door including Title, TempTag and all paperwork, but no sales tax in NH) and expect to settle at $18,100+/- after 2 grueling hours of haggling.

    But with TrueCar, in one hour over 3 email exchanges without leaving my chair I had a commitment for $17,750 out-the-door price, including all paperwork, Title and TempTag fees. The dealer did not have the car I wanted and took 3 business days to do a swap… but I got the exact car I wanted at the exact first-quoted price… a price $400 less than I thought I’d have to pay using my traditional buying methods.

    I will say that TrueCar’s “Best Local Price” varies greatly… my Mazda was under invoice-incentives-holdback, but other makes/models (Jetta Wagon, Elantra Touring) I looked at were not nearly so aggressively-priced. TrueCar quotes do NOT include Doc Fees, Title, TempTags, etc. so that is an additional point of negotiation.

    It should also be noted that with TrueCar, the dealer also sold a unit investing only in those same 3 emails. TrueCar’s efficient selling model offers those who embrace the model the ability to save time and money too… it is really the traditional commissioned salesperson that loses out here; the same way travel agents and stock brokers have been made obsolete by technology facilitating the dealings between buyer and seller.

    Our easily-bought elected officials will try to maintain the obsolete dealer-franchise selling model that generates huge profits and campaign donations… but they’ll ultimately fail. The market always finds its most efficient methods.

  • avatar
    dvp cars

    ….TrueCar better break itself up into 50 little truecars……vehicle sales and taxing transactions, where regulated at all, are under individual state jurisdiction. This newish internet phenomenon is licenced to sell cars in none of these states. All kinds of consumer beefs can, and probably have, resulted from unaccountable middlemen being involved in multi-thousand dollar purchases, with no recourse to local laws for the victims involved…..who said what?, who promised what?,who do I sue?……these questions pop up all the time in transacting car sales. Hard enough to answer in each individual state, but they don’t fancy having to call some nebulous ethernet entity to court every time there’s an issue. On the other hand, the idea that elected lawmakers would favor a few fat-cat,(notoriously) cheapskate, political donor car dealers over millions of voting car buyers is patently ludicrous.
    It’s not a bad starting point for the more timid buyers, but they’re going to have to get more up front about “THIS SERVICE WILL COST YOU, YES YOU, (AT LEAST) $299!”

    • 0 avatar
      hriehl1

      Just for accuracy, I did not buy the car from TrueCar, I bought it from the dealer. TrueCar simply acted as an intermediary to:
      1) pre-negotiate a price with willing dealers;
      2) advertise the availability of that price; then
      3) “connect” me with those dealers honoring the price.
      In my case, I was referred to 3 dealers willing to honor TrueCar’s “Best Local Price”… they differed only in their additional Doc Fees, location and model selection.

      Interestingly, upon delivery my dealer gave me a brochure saying they’d pay me $100 for any referral I provided who ended up buying a car from them. This has been accepted practice for decades.

      TrueCar does nothing different than this except they use an internet-delivered shotgun approach while I, the referring retail customer, use a rifle-shot approach to refer one particular friend or relative. In the end, both methods pay a third-party to solicit and refer a buyer to the dealership.

      Auto retailing has been a politically-protected constituency benefiting from archaic franchising laws for years. I’m confident that clever entrepeneurs like those at TrueCar will be nimble enough to stay one step ahead of the regulators. If I had a 20-year investment horizon, I’d be buying into TrueCar, not some Cadillac dealership.

    • 0 avatar
      hriehl1

      You said:
      “On the other hand, the idea that elected lawmakers would favor a few fat-cat,(notoriously) cheapskate, political donor car dealers over millions of voting car buyers is patently ludicrous.”

      I see the same circumstances and draw totally different conclusions. Lawmakers have already been favoring “fat-cat,(notoriously) cheapskate, political donor car dealers” for decades. TrueCar and the internet are not the first the challenge their protected-market status quo… they’re just the most recent. This very thread is evidence that TrueCar is under legal threat yet they do nothing different than every retail buyer is paid to to… refer another buyer into the store.

      Challenges to the dealer-franchise model have been struck down for decades, to the benefit of car dealers and the disadvantage of the buying (and voting) public. Yet there has been no outcry from the millions of voters affected. Nor will there be this time.

      I believe the very situation you say could never happen, that pols would screw the many voters to favor the (connected) few dealers, has already been going on for decades. And it continues today.


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