TrueCar Shares Plunge on Missed Earnings Call

Dealers aren't fond of transparency. I suspect that they are more fond of Edmunds' approach, which pushes a market average figure (its TMV figure) rather than what is supposedly a rock bottom price as does True Car. In a way, the dealers have a point. True Car essentially wants to be a car dealer that doesn't have to hold inventories or own stores. It wants some of the profit without the customary investments. Combine that with its desire to have information symmetry that dealers would rather keep to themselves, and True Car can't reasonably expect the dealers to love them -- in many respects, True Car is a rival, not a partner.

@Pch101 Agreed on all parts. The transparency issue is getting better thanks to the readily available information via the internet, but it all boils down to the old addage: "A good deal is whatever you think one is."

@hreardon “A good deal is whatever you think one is.” Sounds like a good mantra for "sign on the dotted line", high pressure sales tactics. The goodness of a particular deal only holds until you gain better information...... The increased ease of information gathering enabled by the internet, has, and should continue to, work to reduce the possibility for later rediscoveries. But the sales sharks are, as they are wont to, doing their darndest to drag the taxfeeders into the game, helping them keep things murky.

Stuki - What does "perfect information" look like?

You don't need to haggle. You just need to shop around. Pull up your favorite car buying web site and start searching. There are some very good deals to be had with advertised prices. These are the sites that are charging the dealer $18, so the uptick is negligible. We bought our last vehicle at a no-haggle dealership. The price was very fair. They were upset when we turned down financing, extended warranties, and all the other fluff.

The reason people pay list price of other retail goods is that the pricing information is transparent, so consumers can easily price-shop and market forces drive pricing down to a competitive level. Nobody marks up the price of a shirt to some arbitrary figure that everyone knows to be well above the market price, and then says "come in when you're ready to buy and we'll make a great deal!," all the while hiding the ball on actual selling price until the very last possible second. When a shirt has a price tag on it, you know that that is the price the retailer is willing to sell at, and you can easily look to see if another retailer is selling the same shirt for less, and buy it there instead -- unless the higher-cost seller offers a better value proposition, but 'premium experience' and 'car dealer' are rarely used in the same sentence. And of course, many retailers do price-match, run price promotions, honor sale prices on prior purchases if you ask nicely, etc., but that's a different discussion. But again, there's never a need to haggle. Just do a little research ahead of time to find the bottom of the market for your car, offer to buy at that number, and present that offer elsewhere if the first place responds with anything other than "yes."

@Madroc Consumer electronics have inflated MSRPs that nobody pays. Consumers haggle on cars because cars are expensive and they know that they can. In some cultures, everything is negotiable. I've haggled over the price of a bottle of water, cab rides and meals in developing countries. (Once, just for sport, I haggled with an Indian merchant over the price of an umbrella that was carrying a price tag of less than $2. He treated it like a real haggle.) It is possible to haggle on all kinds of goods, but most consumers are apparently unaware that they can negotiate those prices. I miss Circuit City -- they were happy to negotiate if you wanted them to.

@Pch101 Most retail goods have inflated MSRPs that nobody pays (and yes, consumer electronics in particular) but the actual selling price is displayed right alongside it. Usually the first is called the "original price" and the second a "sale price," even when it's totally laughable because the "sale price" is the only price anyone ever paid. And because the actual selling price is clearly marked, a consumer can easily see if it's cheaper elsewhere, so market forces keep pricing in line and force retailers to adopt leaner, more efficient business models.

@Madroc "the reason people pay list price of other retail goods is that the pricing information is transparent, so consumers can easily price-shop and market forces driving down to a competitive level". Okay, but there is transparency in pricing on the auto retail side of things if, like with shirts, you accept MSRP as being the price for the product. There's no hiding of the selling price - it's listed on the window sticker. You're right about shirts - what they do instead is have inventory clearance sales at the end of the season, or retailers will have regional sales based on demand. The mere fact that, say, Banana Republic can and does offer 35%, 40% and 70% sales on their merchandise shows just how great the margin is on their products. Do you ask to see the invoice price for your shirts before buying? I agree with the statement about Edmunds mentioned earlier: I think that providing a 'range' based on zip code is where the market is headed, very similar to real estate purchases: you can research what comparable houses in that zip code have sold for in the past year to get a good range. There are essentially three types of buyers: 1. The person who cannot, does not, or will not haggle because they hate it. This person pays full MSRP for the convenience of not haggling, or uses a service to avoid negotiating. 2. The person who doesn't want to feel like they paid too much - for this person, having some knowledge of what others have paid and falling within that median will make them happy. They pay the goldilocks price. 3. The person who cannot tolerate paying more than $.01 more than the next guy and needs to be able to tell people they got the 'best deal'; This person will fight over $5 and willing to admit to it or not, likes that. TrueCar is aimed primarily at the #1s above, Edmunds is perfect for the #2s, and the #3s are a complete pain in the arse for any retailer.

@Pch101 PCH - Unless you go to the Apple Store where the price is what the price is. Every now and again they'll toss in a little freebie, but that's rare. You'll see some 3rd party retailers who sell Apple products list for a few dollars less, or bundled with some goodies, but again: rare. You move to a direct sales model for automobiles and I would put money on the same thing happening there: expect deals at one time of the year only: model year clearance.

@Madroc The "actual selling price" is what both parties choose to accept. If you've already decided that you aren't going to haggle on suits, musical instruments, furniture, cameras, AV/home theater equipment, etc., then yes, that asking price will be the "actual selling price." But that is only because you as a consumer (foolishly) decided to not negotiate.

@hreardon Yes, I forgot to mention Apple, which manages to charge very high prices while making people feel good about it. It's hard to imagine that consumers believe that this be-nice-to-you-in-exchange-for-maximum-price system actually helps them.

Madroc - Again, not that I'm advocating the model, but I would argue that the selling price is indeed listed on every car window sticker: MSRP. If you want a discount you need to ask for it. If you don't want to ask for a discount, you don't ask and pay more. I get your point though - why can't this be more like consumer goods? This isn't like produce or (non branded) clothing where a five pack of Hanes tee-shirts can be purchased at CVS, Macys, Target or WalMart. Whether we want to admit it or not, cars, like houses, are emotional purchases; Otherwise we would all be living in 750sq ft. two bedroom apartments and driving Carollas. It's not dissimilar to buying a house: the listing price is often times not the selling price, but it's a point from which to begin the negotiation. From that point you can adjust your offer based on how quickly comparable homes are selling in the area, amenities (or lack thereof), and the need of the seller to unload the house. Dealers know better than most what the local demand for a product is. I recall back in '99 that everyone wanted silver Volkswagen Jettas and Beetles. There was a limited supply of silver Jettas and Beetles and so if you wanted one, you paid more than for a black, red or green one. On the flip side, we couldn't give away red and green Passat wagons yet we were flooded with them. We'd whore those out to anyone who even blinked in their general direction.

@Pch101 Most non-car (and non-fresh-food) purchases are available online at rock bottom prices for those who don't want to haggle, yet still want to get as much as they can for their money. And this is a huge segment of buyers for most goods. Truecar was/is aiming to provide as close an approximation as possible of this, overlayed over the legally mandated franchise model. But make no mistake, Truecar is in no way, shape or form the ideal way to serve that market. Just perhaps the least unideal way, that doesn't get them thrown in jail for providing their customers too good a buying experience.

@hreardon It's true Apple Stores have a set price. It's also true that their prices are expensive, given that they offer premium products along with a hefty markup. However, you don't have to buy from them. That's why Windows and Android and countless PC manufacturers compete with them, offering products that usually aren't as good but are definitely cheaper. Furthermore, nothing is stopping any company from stepping up its game and gunning for Apple's high-end market segment. That's the real reason Apple's prices are so high--they don't have any real competition in their segment (premium phones, tablets, and computers). It has nothing to do with whether they sell direct. As an example, Best Buy also sells Apple's products--but for around the same price. There's a middleman that isn't doing anything to drive down prices. Indeed, how can it?

@Madroc In America, we don't typically over t-shirts and cans of soup because (a) the consumer decides that he can't haggle and (b) we often end up buying things from major retailers who hire staff to be order takers, not negotiators. Basic rule of thumb: If you are buying at a store where the owner is close by and/or your assistant is paid bonuses and commissions, then you can almost certainly haggle. And you should.

@hreardon I'm so glad to be a #3. You and your competitors will price the same exact consumer good at wildly different prices. Tell me oh no, the invoices are different. The three vehicles I've been researching have the same exact invoices/options. Tell me your next lie. But my dealership add special items to the invoice to enhance the consumer experience! A naked college-aged woman had better be delivering those special items to me. Daily. IF not, they're not special. Hreadon car care for life!; that's worth over 1500 dollars over the life of your car!!! I pay my rides off early and can't wait until I can leave this cesspool of a city. Another quasi-lie that is neither here nor there. Especially when I think your service writers are thieves with clipboards; "Sir, your battery is 6 months old and due to go out at any time!!!" Me; "It has a 60 month warranty, so that's 4 and half years to go. Yes, I did that complicated math in my head". Service Writer; "But Sir Hreardon can install a new battery at the discounted rate of $568.73 since you're in the Hreardon El-Supreme-O, Chairman's Circle, Most Loyal Premier Customers club." Me, "I get my oil changed and the free car wash. I also check my oil before I leave, since counting out 6 quarts take both hands for some technicians." So yeah, you won't get mush sympathy with this crowd