Dealers Balk at Paying Finder Fees for Existing Customers

TrueCar may have stepped in it again.

Auto-retailing expert Joe Webb has brought to light something many TrueCar dealer clients probably already know.

The online automotive lead company only will consider dealer requests for credits under specific guidelines in cases of a car buyer going to a dealership first, then later using TrueCar pricing information as part of negotiating a deal. 

In his blog, “DealerKnows,” Webb writes:

“As of September 1, TrueCar is altering their “write-off policy” for dealers. Essentially, TrueCar states that their customers are so much more ‘deep-in-funnel’ than all other lead providers, dealers on their per-sale payment model will no longer be allowed to request write-offs.

“Whether or not those sold customer originated in their CRM (customer relationship management computer system) before becoming a TrueCar lead no longer matters.

“In other words, even if you sold a customer four vehicles in the past, and that customer submitted a lead on Edmunds the month prior that arrives in your CRM, and comes in and speaks to a sales associate, leaves the dealership, goes on TrueCar, submits their information again, and inevitably purchases from your dealership, the dealer will be unable to request a full write-off.”

I talked with Mike Timmons, TrueCar’s executive vice president. He is a car guy who helped guide TrueCar out of the bog it got into last year when auto dealer advocates, led by Jim Ziegler and others, objected to the previous TrueCar business model that included arming consumers with dealer information they just had no right to. 

The fact is, TrueCar’s previous per-transaction business model was deemed to be illegal in many states, and replaced in those states by a variety of programs, some involving a flat subscription fee.

The dealers who might be affected by this latest policy are in states where the per-transaction model still exists. Under that model, TrueCar charges dealers for providing leads converted into sales.

According to Timmons, the so-called “new” policy is not new, but is a policy where none previously existed. 

In the absence of a stated policy, there was too much case-by-case discussion based on subjective data as to whose customer is it. That had proven to be impractical, given the fact that thousands of TrueCar dealers still are on the per-transaction revenue model.

Now, there is a policy dealers can consider in deciding whether they want to participate in the TrueCar lead program.

Dealers can decide if the extra money they owe TrueCar for sold deals is worth the investment. 

In some cases, dealers might want to take the gamble and drop TrueCar if they think the bulk of the company’s leads already are customers. A dealer might detect that a substantial number of TrueCar prospects had already been to the dealership, talked to a salesperson, were registered in the CRM system and then went to TrueCar’s website for pricing.

Or a dealer might consider TrueCar’s done-deal fee as something like buying insurance. If the consumer goes to the dealership first, is using the Internet to validate pricing anyway and TrueCar makes the difference in the dealer keeping the deal, well, many dealers are happy to pay for that. 

Time will tell as to what dealers will do. They now have a clearly stated policy on which to base their decision.

David Ruggles is an auto consultant and former dealership general manager. He can be reached at [email protected].