Some dealership people claim TrueCar has hoodwinked dealers into giving it proprietary pricing information that TrueCar then gives to consumers.
My interview with Scott Painter went OK, though I wondered why I had to drag myself into the office early one morning in 2007 for what ended up as a “phoner.”
His people had pitched the interview with Painter, a self-described “serial entrepreneur,” who had founded a company selling Internet leads to auto dealers.
A PR person proposed that Painter, while in town, stop by WardsAuto offices. But because of his schedule, the visit had to be early, before normal business hours.
So I drove in at dawn, turned on the lights, brewed a pot of coffee for my guest and awaited his arrival. But then Painter phoned in. He was ready to talk. He decided not to come in after all. That would have been nice to know earlier.
I was a bit miffed, but not nearly as mad at him as many dealer people are now.
Painter has drawn their ire because of how his firm TrueCar.com operates. They claim it has hoodwinked dealers into giving it proprietary pricing information that's then given to consumers.
It essentially works this way:
TrueCar sends Internet leads to participating dealers but only charges for leads that end up as sales. TrueCar accesses their dealership-management systems to confirm how many leads become sales.
But TrueCar also provides pricing information to car shoppers who use its website.
In response to allegations that the information is extracted from dealers' operating systems, Painter insists it comes from other sources. TrueCar uses that data to give consumers local pricing information in the form of bell curves showing recent high-low transaction prices. Armed with that, consumers can then submit leads proposing how much they are willing to pay a dealer for a vehicle.
It’s like going through someone’s books before negotiating with them. Some would argue that financial transparency is one thing, knowing everything a dealer has is another.
The soft-boiled eggs hit the fan when dealership people figured out just what was going on. They now are blogging like crazy, painting Painter as someone who wants to turn the auto-retailing industry upside down.
Some of his supporters say detractors misunderstand him. But for a while now, Painter has clearly stated his vision of how the industry should sell cars.
In a 2008 story headlined “10 Automotive Retail Heresies,” WardsAuto Dealer Business listed some of his espoused ideas on the future of car selling.
• As new-car margins shrink to near-nothingness, the only way to bring profitability back to sales is to offer “incredibly aggressive upfront prices.”
• Pricing transparency for new-car sales, where the buyer knows the bottom line price in advance, is “very, very good business for dealers.”
• As a job category, the commissioned new-car sales force is obsolete. “The best thing a new-car dealership can do to make money is to give its commissioned sales people their walking papers.”
Auto-retailing veteran Tom Stuker tells me, “Scott Painter won’t decide if dealers should eliminate salespeople. Dealers will decide that.”
But WardsAuto columnist David Ruggles, a former dealership general manager, says, “I disagree with Tom. If this whole thing runs to a conclusion, there won't be any new-car dealers either.”
He says at least one major auto maker toyed with the idea of operating a local track with a variety of inventory. Consumers would test drive what interests them, then order from a regional distribution center for deliveries to their homes.
“For this to work, dealers would have to be driven out of business first,” Ruggles says. “Arming consumers with all the information is a good way to accomplish that.”
Ruggles calls himself “a traditionalist,” yet one who understands “the Internet has changed everything.”
So what do dealers do? Some people say it’s time to call in the lawyers.
The son of a California dealer tells me: “As prices continue to deteriorate because of absolute pricing transparency from lead providers like TrueCar, this could end up as a national legal issue.”