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Monday, March 31, 2014

The Truth Sells Cars

Remember that you heard it here first. There is a company that “gets it” when it comes to selling cars. If you’re a reader of my weekly column and blog, you’ve heard me mention TrueCar before. In full disclosure, I’m a dealer for TrueCar and I’m also a member of their national dealer council.

The CEO of TrueCar is a very smart man named Scott Painter, and about 10 years ago he figured out that the way to be successful in the retail car business was to create a company that always told the truth about selling cars. He saw that most car buyers, not only disliked the car buying process, but actually feared it. He knew that car buyers are usually fearful that they will pay too much for their next car. Nobody likes to be taken for a sucker. How bad do you feel when you find out that your friend bought the same car that you did for $2,000 less? He read the annual national Gallup polls that ranked car dealers last in honesty and integrity. He saw and heard the bait and switch advertising and was aware of the unethical and deceptive sales practices that exist in most car dealerships.

Scott Painter also saw the amazing success of 21st century companies like Apple, Amazon, Starbucks Costco and Nordstrom. They are successful because their customers believe what they tell them is true. He saw a huge opportunity if he could create an online company that would take the fear and distaste out of buying a new or used car. Scott found a group of very smart investors who shared his vision and TrueCar was born.

TrueCar sells cars through existing dealerships.  To become a TrueCar dealer the dealership must allow TrueCar to access their data management system, DMS. TrueCar keeps this information confidential and does not disclose the name of the individual dealers. But by analyzing the data of all the cars sold in a market, TrueCar knows what each year-make-model car is selling for. They can then tell prospective car buyers what they should pay for that car. The buyer knows the price of the average transaction as well as the lowest and the highest transactions. TrueCar then gives them the “TrueCar Price” which is the lowest price that a TrueCar dealer will sell that car for. This price is a good, low price, considerably below MSRP, and lower than the average price transaction in that market.

The TrueCar dealers are giving you a low price because they know you are comparing their price with, not only other TrueCar dealers, but other dealers for that make in your market. The TrueCar dealer is contractually obligated to sell you that car at the price he posts on the TrueCar website. 
I’m not suggesting that buying a car from a TrueCar dealer today is completely without risk. I am saying that it’s the safest way to get your best price on a new or used vehicle. You should still shop and compare your TrueCar price with at least two other car dealers. TrueCar is evolving and improving their processes and their dealers continuously. I speak from the perspective of a member of TrueCar’s dealer council. Last week I attended a meeting in Santa Monica, Ca. where I met with Scott Painter and all of the top executives of TrueCar. Plans are in the works for even more transparency when it comes to the TrueCar price.

Scott Painter walks a tightrope between the car dealers and the consumers. The car dealers, car dealer associations, and politicians (influenced by dealer lobbyists) rebelled against TrueCar two years ago. Dealers did not like the fact that TrueCar was requiring them to offer their lowest price to the car buyers. Most car dealers think that the “haggle and hassle” way of selling cars is the best way to make more money and sell more cars. Dealers quit in large numbers and TrueCar lost over half of their dealers nationwide. This mass defection was aimed at the heart of the True Car business model: in several states, True Car charges dealers $299 for every new car sale and $399 for every used car sale generated through their referral process. The FTC is currently investigating this as an illegal boycott by the car dealers and it hurt TrueCar financially.

 Since then, TrueCar has rebounded strongly and is currently bigger and financially stronger than ever before. Dealers have come to realize that they do sell more cars with TrueCar, albeit at a lower profit. TrueCar is growing exponentially and I expect them to be the main way that cars are bought and sold in the USA within the next ten years. Scott Painter has a favorite saying…”Truth Sells”. In fact, he bought the URL, He’s looking at expanding the honest way of retailing to other industries worldwide. Who knows? We may be buying houses, stocks, and insurance through a “True” company in the next decade.

My advice to you, the car buyer, is that the next time you buy any new or used car, click on My advice to the car dealers (who regularly read my column and blogs) is “Get aboard the TrueCar train before it leaves the station.” The way TrueCar is growing, you may not be able to sign up with TrueCar in the future.  TrueCar will sign up only a limited number of the franchises of one make in a particular market. By the way, TrueCar also won’t sign you up unless you agree to play by the rules and they will enforce the rules. Hiding dealer fees and dealer installed accessories when you quote the price, bait and switch, and all those other shenanigans are strictly forbidden. But don’t be afraid, because you will sell more cars and have happier customer because, as Scott Painter says, “The truth sells.”