Best PracticesIndustry News & TrendsOpinions & Advice

Is This the Beginning of the End for TrueCar

TrueCar has had a roller coaster ride in the automotive retail industry over the past few years. However, it appears things may be taking a turn for the worse (both for TrueCar as well as its participating dealer clients). Read on, as I reveal their new policy changes that will have a negative impact on dealers, as well as my in-depth interview with a top eCommerce Directors about this change.

The TrueCar Cliff Notes:

Having aggregated so much data to benefit consumers over the years, TrueCar challenged the retail market to deliver competitive pricing to their online shoppers. However, as more shoppers funneled into their site (and partnering sites), it was obvious that dealers needed to take notice of the TrueCar machine.

Fairly quickly, dealers began taking issue with the way TrueCar came about some of the consumer-facing data that was being shared. Then the “dust-up” happened. Industry leaders such as Jim Ziegler and Jerry Thibeau led the charge against TrueCar, and urged dealers to cease the data extraction they were allowing TrueCar as it was only being used to bite them in the proverbial backside.

TrueCar, after an unnecessarily long battle to prove what they were doing was acceptable, reconvened with others in the industry and reengineered their site to be more dealer-friendly. Since then, TrueCar has once again dominated the third-party lead segment (with the help of venture capital backing and strong corporate relationships with affiliate partners).

My dealers, for instance, all seem to have significant success with TrueCar opportunities. However, there were questionable charges that frequently popped up. In most instances, TrueCar relented and maintained that the “customer is always right”.In this case, their customer is the dealer. That is about to change.

The Bombshell:

As of September 1st 2013, 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 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.

Click here for a version of the new TrueCar Write-Off Policy, effective September 1st 2013. In the end, the dealer will have to pay. You will see that partial write-offs (up to $100) will be granted to those dealers on the Pay-per-sale model, but only for extenuating circumstances. Subscription-based dealers have no write-offs.

The Reason:

As an automotive consultant, I can see this policy change happening for only a couple of reasons. Let it be known that I did not once take to a public forum during the previously described “dust up” to wage war against TrueCar. I believe their business model was a profitable one, and sense consumer-facing data will rule our industry sooner rather than later.

I made no indictments of them, but did educate the clients of DealerKnows about TrueCar’s initiatives. However, we did this during our normal, one-on-one consulting times and not online. I feel, though, as an advocate for our dealer industry, I should bring to light this policy change that could have a negative impact on all participating TrueCar customers.

TrueCar states that they are not a lead generator, but simply a new consumer strategy with which to purchase automobiles from dealers. For that reason, if another lead provider sends a dealer a lead that predates the time TrueCar sends the same customer’s info, it doesn’t matter. TrueCar still deserves credit because the customer obviously prefers the TrueCar way of shopping, so they say.

From the outside, it appeared TrueCar was back on their way to dominating the lead market, but this type of policy change must mean they are struggling internally with a cash flow problem or that they are just showing their true stripes. Maybe they are the cash-grabbing corporation they were originally assumed to be. It has to be one of those two reasons.

Making this policy change will end up costing dealers more money.

This was admittedly brought to my attention by a respected eCommerce Director from one of our DealerKnows clients in Chicago. This individual prefers to remain anonymous. I thought I’d get his perspective on this policy change, how it affects his dealership, and his thoughts.

My Interview with the eCommerce Director around TrueCars…

Joe: In a few words, tell me about how you viewed your relationship with TrueCar prior to this policy change?

eCommerce Director: I’ve had a 7-year relationship with them. When everything went down with TrueCar over a year ago, we got off the program for two months, but then back on.

At the time, we had felt like they had gotten checked back into place and straightened up their act. They promised to be better dealer partners. We came back on board and had relative success with them. We still didn’t close them at the rate I’d like, but made an additional 5-7 sales per month per store (about 25 sales total a month).

Even with the $399 cost-per-sale and a lower margin than usual, this was in line with what I accepted. But I was writing off a lot of their supposed claimed sales.

Joe: How many TrueCar sales per month would you say were questionable?

eCommerce Director: 50%.

Joe: Holy crap!

eCommerce Director: Over the past year, we’ve written off half of the sales they attempted to take credit for. My friend at another store writes off 60% of his claimed sales. Whether they were duplicates, customers we were already working, past customers, owner referrals, or even if someone at the same address of a sold customer – roommate for instance – goes on TrueCar, they would attempt to invoice us for the sale. They’d just send the bill because their system will grab anything and everything that might possibly be a link and charge dealers for it.

Things got complicated six months ago when they attempted to charge me for phone calls that were coming from Yahoo Autos. Even if we hadn’t picked up the call, and even though TrueCar sent no info of this customer into the CRM, they would somehow match it up with sold customers from our database. I found this unacceptable and pushed to get away from receiving “phone leads”.

If it doesn’t originate in my CRM from them, I have no way to verify its validity. So it is useless to me and I couldn’t, in good conscience, pay for those sales.

Joe: On average, what was your experience like getting write-offs?

eCommerce Director: Up until this last year, it was relatively easy. We didn’t have many serious arguments. The last 90 days it has been a battle though. They seem smug about writing something off now. More combative. I think they have investors trying to tell them how to make more money, and, just like last year, it slapped them in the face.

Now, this Write-Off Policy is another sleazy way to extract dollars from dealers. They claim they never had a write-off policy before, and now they’re going to hit every dealer on Sept. 1st with the bad news, giving them no adequate time to make a decision.

A good dealer partner would never hit a valued customer with a major policy change with no notice like that.

Joe: What do you think this Write-off Policy will end up costing your group additionally each month?

eCommerce Director: It’s $399 cost per sale and I was writing off 50% of the total sales. I was already paying for the 25 legitimate sales as a group per month. This policy change just bumped my cost for TrueCar an additional $10,000. That is a huge pill for any dealer to swallow.

Joe: Do you feel this has broken the relationship and will this affect the longevity of your partnership with them?

eCommerce Director: Right now, they’re on the chopping block. I’m just waiting for permission from the owners to rededicate the money elsewhere. I can spend $20,000 elsewhere and get 25 legitimate units per month, that’s no problem. And probably with higher margins.

I’m not going to waste my time taking screenshots of customers to get only a quarter percent of the write-offs solely so they can double their profits. Not cool.

Joe: Why do you think TrueCar made this policy change now? Especially since they seemed to have won back the dealership trust they had lost during the “Kill the Beast” debacle?

eCommerce Director: I think back to how the founder of TrueCar was promising to be a better dealer partner in the future. The fact that we are a week away from this policy change date and the greater percentage of their dealer network doesn’t know about it proves to me that they don’t care about us dealers and don’t belong in this industry. That it is one year after a massive online, state, and national battle and they’re doing this undermining crap solely to double their own profits, it’s unbelievable. I don’t know how they’ll recover without, once again, getting knocked down by the dealer population and having to rethink their strategy.

I look at TrueCar as the spoiled only-child in a family that always got their way, would misbehave with no punishment. They keep misbehaving and misbehaving until their parents, in this case the dealers, give them a good spanking. (Not that I ever strike my kids, but you get the picture of what must happen to correct this negative behavior.) Only then does the child fall in line. Eventually, they’ll start getting spoiled and misbehaving again. It’s happening here.

Joe: Thanks so much for your input.

— end of interview —

How are you going to handle this new TrueCars write-off policy?

N
  • N
    Nick Bueter
  • August 22, 2013
Wow!
T
  • T
    Tommy Malone
  • August 23, 2013
Philipa, interesting read?
P
  • P
    Philipa McMenemy
  • August 23, 2013
Definitely. Tho we are a subscription state.
J
Great post, Joe.  I couldn't help but chime in as we're also a dealer that's heavily affected by this newly introduced "no write off" policy.  In fact, we were one of the first dealers to be forced under this new policy prior to the “official” change date.
Approximately one month ago, I received a phone call from their Director of Account Management.  This individual started the conversation by asking if the policy change email he had sent over a few days prior was "acceptable."  I was completely blown away.  First off, contrary to this person’s statement, no email had been sent.  Second, why would a change such as this one, which would result in our dealership having to pay for nearly 40% more invoices for leads/sales that did not originate via TrueCar, be acceptable?  
After questioning this new “no write off policy” we came to realize that there was not yet an actual, defined policy in place for all TrueCar clients.  However, TrueCar still informed us that the"current change applies to your store at this time", and offered to "temporarily suspend leads" for us.  We, as a dealership, feel this was handled unilaterally, instead of having an actual new policy in place, and rolling it out to every store simultaneously.
R
  • R
    RockySC
  • August 24, 2013
As of today we have severed our ties with TrueCar.
We experienced the exact same scenario. Write-Offs were never an issue and my rep was great and then over night it has become difficult and they have adopted an attitude of "you need us"
After doing some digging...we found that we had contact with these customers 35% of the time or they were our previous customers. We are confident that with a little hard work and some strategic partnerships we can maintain our volume while increasing profitability.
J
  • J
    Joe_Turner
  • August 24, 2013
I wonder why the State Associations of the states in which TrueCar operates as a Pay Per Sale billing model don't begin to lobby their legislatures to adopt the same laws as the states that force TrueCar to operate on as a monthly service fee.?
J
  • J
    JohnGQuinn
  • August 26, 2013
Ahhhh.... all makes sense.  Failing model, temporary "retreat," then one more surge to grab some bucks before sailing off into the sunset. Good riddance.
L
Great read. There has to be a balance for a country to thrive. This industry is a huge part of our economy and so, checks and balances are a necessary part of doing good business.
S
  • S
    SteveD
  • August 28, 2013
We had same scenario here. We just canceled them yesterday.  I think the reason they are doing this is because their partners probably think Truecars is getting the money and just not paying them their share, like maybe they doubt their reporting on these matters. Or the partners simply told them that THEY still wanted paid even if Truecars wrote it off. Either way it doesn't matter to us. We don't have a dog in that fight if there is one. We just simply are not going to pay for leads where we have had previous engagement with the customer. And what's this crap about them not sending us leads? Say what? So if that were the case, those --- whatever they want to call them --- should close at 100% right? Give me a break!
B
  • B
    Brandi
  • August 28, 2013
I agree with everything said in this article. We have been with True Car for many years. Write offs were a breeze up until the past few months. Now they are being incredibly difficult. They fight me with every possible reason they can think of. Recently I had one write off denied because they claimed THEIR inquiry led to the sale, of course it couldn't be our own website and communication with the customer...
We do have good sales from them but we also write off about 60%. I'm glad to see other dealers are at the same rate when I was told we were higher than almost all dealers.
After them pulling the "our inquiry led to the sale" a few months back, I requested the terms, conditions, or policy that showed this. They couldn't not provide one but supposedly were in the works of making a Write Off Policy. I never would have guessed it would be a NO write off policy!!
They also threw in a PHONE lead, something new they were trying at the time without any warning to the dealer. I talked to my rep and it was supposed to be written off. This was back in April. Maybe we are a bit stubborn but it's still sitting on our statement with them trying to push us to pay it when told not to.
I do not like the direction True Car is going and we will be a dealer that pulls out if they actually push this No write off policy through. Our money can be better spent!
S
  • S
    SeanVBradley
  • September 1, 2013
http://www.youtube.com/watch?feature=player_embedded&v=BMHjugn1Dxo
S