A couple of weeks ago a middle-aged woman came to my dealership to buy one of our best-selling Bel Canto sedans. Before coming in, she had gone online and gotten a price quote from TrueCar. TrueCar passed along her contact information to us along with the quote. When I looked at the quote, which TrueCar calls a "Price Report," I was amazed by the amount of information it showed and its accuracy. The price was broken down like this:
TrueCar Member Network Estimated Price: $24,019.00
Invoice Price: $23,899.00
+ Options: ($0.00)
+ Regional Ad Fees ($0.00)
+ Destination Fee ($820.00)
+ Dealer Offset From Invoice (-$700.00)
- Dealer Cash ($0.00)
- Finance Cash ($0.00)
- Customer Incentives ($0.00)
- Program Incentives ($0.00)
Minimum Estimated Savings = $1,696.00 Below MSRP
All you Rip Van Winkles who still believe in phony invoices or complain about the "lack of transparency" in car sales today need to snap out of your hundred-year sleep and take a look at a TrueCar Price Report. It's ALL there. Every bit of it, except for dealer holdback and, curiously enough, MSRP, or manufacturer's suggested retail price, but both are readily available elsewhere. This single e-mail from TrueCar provides the customer with everything the dealer knows. Which is truly remarkable if you think about it.
What exactly is TrueCar? Well, according to its website, www.truecar.com, it is an "information provider." Founded in 2005, the California-based company collects pricing information on automobiles and passes it along to consumers at no charge.
What's different about TrueCar is that the information it provides is based on real-world transactions, relayed by participating dealerships, and it's updated weekly, with manufacturer incentives checked daily. If you go to TrueCar's website you can put in your ZIP code and pull up a graph representing what others in your area have paid for the vehicle you want within the past few weeks, ranging from the lowest (which it calls the "Unusually Low Price") to the highest ("Above Market Price"). TrueCar will then provide you with a Price Report, which you can take to one of about 10,000 participating TrueCar Certified Dealerships across the country, thus eliminating the hassle of car buying.
But TrueCar, like all third-party price providers, has it weaknesses. For one, what happens when consumers build a car online and get a Price Report from TrueCar only to find that the "virtual car" they've conjured up on the computer doesn't exist or isn't available in their area? Well, I've experienced it firsthand. The result is a great deal of frustration, and no deal.
The problems with my customer began when we discovered we didn't have the exact color and option package she wanted, and we had to explain to her that, generally speaking, special pricing like TrueCar's is only good on vehicles that are currently in dealer inventory. This is a common problem with quotes from third-party sources such as USAA or Edmunds. Even though it's usually stated on most of these websites that their price is only available on vehicles in stock, 99 percent of the consumers I deal with do not notice the disclaimer. My customer got very upset when she found out we couldn't get the exact vehicle she wanted from another dealership. To try to salvage a deal, we told her we would be happy to give her the TrueCar price on any vehicle in stock, and she agreed to take a look at our inventory.
How are we supposed to sell someone a car for less than we paid for it?
Unfortunately, the closest thing we had to what she wanted was a performance model, the Bel Canto GT, which had a price of $28,475 – about $2,775 higher than the vehicle she originally came in to buy. But my customer agreed to buy it if we could get our price "close to" the target price TrueCar had given her on the first vehicle. After I presented her with numbers based on TrueCar pricing for the GT model, she said we were "way off." According to her, we should be able to sell her our $28,475 car for $24,500. That's $500 above the original TrueCar quote and $3,975 below sticker price. And she wouldn't budge.
Keep in mind, the Bel Canto isn't chopped liver. It sells well, it's gotten great reviews and won many awards, and we have absolutely NO incentives on them. Zero rebates. Zero dealer cash. And exactly $1,004 of markup to play with. When I pointed all this out to my customer and showed her that TrueCar's Price Report confirmed what I was saying, she was unmoved. The highest she would go was $24,500. In exasperation, I asked her: "Ma'am, when you got this quote from TrueCar, did they explain how we were supposed to sell you a car for $3,000 less than we paid for it?"
Long story short, we gave the customer our lowest price, which meant losing money, and she got angry and left. Later, she told my sales manager I had been rude and she would never buy a car from us -- ever. Several weeks later, this whole experience still plagues me. How are we supposed to sell someone a car for less than we paid for it? In what world does this make sense?
When TrueCar first started out, it caused a great deal of apprehension in the car industry. Its advertising was built around the goal of providing consumers with "the lowest price." To those of us in sales, that means taking money out of our pockets. Maybe even putting us out of business. Since then, however, TrueCar has shifted its emphasis and now its slogan is "Never overpay." Which sounds a little nicer, and suggests that maybe dealerships are entitled to some profit. But whether the goal is providing the lowest price or protecting consumers from overpaying, I think the biggest problem many of us in the car business have with TrueCar – or AutoTrader, Edmunds "True Market Value," USAA, or any other similar service -- is the idea that a third party can dictate what we should sell our products for.Let me put it this way. Suppose you had a little artistic talent, and you liked working in clay, so you saved your money and opened up a little shop down on Main Street, selling pottery. You're pretty successful, and then, one day, some guy sets up shop across the street from you, and his whole gig is telling people they're overpaying for your pots and what they should really be paying is X, not Y. How would you feel?
I defy anyone to find any other industry where a company's actual costs and incentives are as well known, or as clearly spelled out, as they are in car sales. Buying a boat? Go online and try to find out how much the dealer paid for it. Good luck. There is no such thing as "TrueBoat." Same with motorcycles. Want to know how much profit the dealer is making on that Harley-Davidson Street Glide or what the last guy paid for one? You won't find that kind of information on "TrueMotorcycle" because it doesn't exist.
Only in the realm of car sales is accurate, comprehensive, up-to-date information readily available for public consumption, and only in car sales is it accepted practice for a company to exist solely for the purpose of telling consumers what they should pay for another company's products. And, get this -- they even charge the company selling the products money for cutting their prices! Again, kind of mind-boggling.
It's a fact: TrueCar makes dealerships money, or it wouldn't be so successful.
But there's a reason car dealerships pay for TrueCar's services. It's because TrueCar is the No. 1 provider for car dealerships all across the United States. One general sales manager I interviewed said this: "I love TrueCar. When TrueCar customers come in they're ready to buy, and TrueCar cuts out all the back and forth. Most of the time dealerships take two or three hours negotiating and still end up at the TrueCar price anyway, so this just cuts out the hassle and makes things easier for everyone." It's a fact: TrueCar makes dealerships money, or it wouldn't be so successful.
If you ask TrueCar, it will say that its mission is to "make the car-buying process simple, fair and fun." Strangely enough, that's my goal, too. And I can certainly see how TrueCar makes the car buying process fair . . . for consumers. But is it fair for lowly little salespeople like myself? I'm not so sure about that. Basically, what third-party pricing means for me is, no matter how well I know my product, no matter how good a presentation I give you, no matter how well I treat you or exceed your expectations, you'll still only pay me what TrueCar has told you to pay me. Which completely robs me of any motivation I have to learn my product, give you a good presentation, build value, treat you well, or exceed your expectations. For me, you're a "mini deal."
You're the smallest commission I can make. So my goal will be to get you in and out as quickly as possible. Or, you've been convinced that I can do the impossible -- sell you a car for a huge loss -- which only wastes everyone's time. Is this fair to anyone?
To me, this isn't the how free market system should work, and in the long run it may not benefit the consumer. Of course, TrueCar would probably disagree with my assessment and say, "We're not setting ourselves up as price dictators. We're simply collecting data and informing the consumer of what others in their area are paying so they don't overpay." I tried to get TrueCar's side of the debate from executives, but they declined to be interviewed.
But let's face it. The reason companies like TrueCar exist is that we in the car business have, over the past 60 years or so, destroyed the public's faith in us. We have unintentionally made the process of buying a car so difficult, so stressful, and so loathsome that people will actually pay someone else to do it for them. Until that changes, companies like TrueCar will continue to thrive -- and our prices will continue to be determined not by how good a product we offer or how well we do our jobs, but by third parties whom people trust more than they do us.