TrueCar Tries to Patch Up Dealer Relations, Again

Automotive online lead-provider TrueCar is performing major surgery on itself amid lingering criticism that it pits dealer against dealer, causes excessive price slashing and cuts into dealer margins.

The changes, announced in a “pledge to dealers,” come three months after Chip Perry, former head of AutoTrader.com, became TrueCar CEO.

It is the second such initiative in four years for the company that provides comparison prices to car shoppers who then can submit leads to participating dealerships that guarantee quoted prices.

The latest reforms aim to make TrueCar more dealer-friendly. “Dealers are our customers, not consumers,” Perry tells WardsAuto in an interview prior to the public announcement of the changes. “We want to make ourselves accountable to the industry in a new way.”

TrueCar currently has 11,000 dealer clients. Perry says the new amendments focus on three “dealer pain points”: the website's lead-providing method itself; use of data extracted from dealership computer systems; and consumer advertising that in the past sometimes made dealers look bad.

Perry took the helm of a company facing falling stock prices, dealer lawsuits, a formal legal complaint by California’s dealer association and the departure of top executives, including founder Scott Painter, a controversial figure who had sought to revolutionize auto retailing.

Painter at times criticized traditional dealership practices. Perry alludes to that, saying “Company rhetoric over the years has offended many dealers.”

When he arrived at TrueCar in December, “it was apparent to me that the biggest issue facing the company was the need to make TrueCar a more positive place for dealers to do business,” Perry says in a statement announcing the new business practices.

He adds: “Over the past decade, TrueCar has been successful in attracting car buyers, but its overall approach has alienated many dealers across the country. So my first order of business was to go straight to the source.”

Perry says he met with all sorts of dealers, large and small. They gave him an earful. He describes many conversations as “brutally honest.”  

He says the newly announced approach will create a win-win for both consumers and dealers. “We’re making major changes in our product offering to address concerns that TrueCar does some things that hurt dealer profitability and puts 'sand in the gears' of some transactions."

The changes include trying to reduce the use of TrueCar as a purely price-driven shopping tool and enabling dealers to compete beyond price. Plans are to switch from offering regional to local price curves based on crunched transactional data. Including geographically extended regional price data can result in posting lower prices that don’t reflect what's going on locally.

TrueCar also will scratch its dealer list page to discourage consumers from using the service strictly as a price-driven tool.

The company no longer will show an unnamed dealer’s price prior to a lead submission. TrueCar charges dealers $399 for used vehicles and $299 for new vehicles if a customer's lead becomes a sale. The company uses its contractual ccess to dealership management systems to confirm sales and charge dealers accordingly.

But that practice has led some detractors to question how TrueCar thereupon uses that data. Perry says the company’s new reform movement includes clarifying “what data is accessed and what we are doing with it.”  

Another rap against TrueCar is that its consumer advertising depicted dealers as poised to gouge buyers lest they avail themselves of TrueCar services. “We’re cleaning up our consumer-facing advertising and website language by creating more balanced messaging that positions dealers in a positive light,” Perry says.

He clarifies other matters. “We will only support indirect finance and will not offer third-party direct finance products through TrueCar.com. In addition, any Trade-In product we introduce will be based on a well-accepted wholesale valuation and will be offered on a dealer opt-in basis."

In 2012, TrueCar re-calibrated its business model in response to something akin to a dealer insurrection. Thousands of dealer clients dropped TrueCar, claiming it fostered a hyper-competitive atmosphere and a vehicle-pricing “race to the bottom.”  

TrueCar responded by changing some of its business practices. It won back some dealer clients, but criticism has persisted. That’s because those first reforms fell short, Perry says. “Substantively, the company didn’t change that much.”

While some critics cite TrueCar as the industry’s poster child of pricing transparency gone wild, Perry notes it’s hardly the only online lead provider posting such buyer information. “All third-party sites provide it.”

He walked into a financially distressed company undergoing disruptions. But he didn't enter a place in disarray. “I found a lot of hardworking, intelligent people who were receptive to change,” says Perry who, at age 62, expects TrueCar as "my last rodeo.”

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Full Text of TrueCar's Pledge to Dealers From CEO Chip Perry

When I arrived at TrueCar in December, it was apparent to me that the biggest issue facing the company was the need to make TrueCar a more positive place for dealers to do business. Over the past decade, TrueCar has been successful in attracting car buyers, but its overall approach has alienated many dealers across the country.

So my first order of business was to go straight to the source. I met with dozens of dealers of all sizes and asked them what they like and don’t like about working with TrueCar. They gave me an earful of their honest—sometimes brutally honest—opinions. I knew even before I joined TrueCar that big changes were needed, but hearing very directly about the concerns of dealers helped me formulate a new direction for TrueCar, one that is designed to make our marketplace produce a win-win for both consumers and dealers. Some of the changes requested by dealers have already been made, some will happen over the next three months, and the rest will roll out over the balance of the year.

Below are the top three areas of concern expressed by dealers, and the actions we’re taking to address them. I invite you to review our new Dealer Pledge and complete list of action items at truecar.com/pledge.

• We’re making major changes in our product offering to address concerns that TrueCar does some things that hurt dealer profitability and put “sand in the gears” of some transactions. To accomplish this, we are moving to reduce the use of TrueCar as a purely price-driven shopping tool and enable dealers to compete on factors other than price.

• We’re addressing your concerns about how we treat you as customers by redesigning our data policies, billing model, and billing practices. We are also hiring over 100 Field Service Consultants to help dealers make better use of our tools and close more sales.

• We’re cleaning up our consumer-facing advertising and website language by creating more balanced messaging that positions dealers in a positive light.

Additionally, we would like to clarify our intentions regarding potential future F&I and Trade-In products. Please know that we will only support indirect finance and will not offer third-party direct finance products through TrueCar.com. In addition, any Trade-In product we introduce will be based on a well-accepted wholesale valuation and will be offered on a dealer opt-in basis. We hope that these clarifications will alleviate any concern that dealers may have about TrueCar’s futureproduct offerings.

We take these promises very seriously and we fully expect you to hold us accountable for delivering on them. The proof, as they say, will be in the pudding. As we proceed, we will keep listening to dealers and we will be making even more changes based on your ongoing feedback. If you would ever like to discuss any part of our Dealer Pledge, please feel free to contact me — I am always interested in hearing about how we can make TrueCar work better for everyone in our industry.

For dealers who are now using TrueCar, thank you for your business, and for those who aren’t, we hope you will consider us in the future.

Sincerely,

Chip Perry, President & CEO