TrueCar, With Guns To Its Head, Says Uncle. Will Change Business Model

Bertel Schmitt
by Bertel Schmitt
truecar with guns to its head says uncle will change business model

We had been following the dark clouds, lawyers, and regulators circling over TrueCar for quite a while. Today, we w ere 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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6 of 17 comments
  • Jacad Jacad on Jan 16, 2012

    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?

  • LeMansteve LeMansteve on Jan 16, 2012

    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?

  • Hriehl1 Hriehl1 on Jan 16, 2012

    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.

  • Dvp cars Dvp cars on Jan 17, 2012

    ....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!"

    • See 1 previous
    • Hriehl1 Hriehl1 on Jan 17, 2012

      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.