TrueCar has had a rollercoaster 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.

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.

I’ve attached a version of the new TrueCar Write-Off Policy, effective September 1st 2013, at the bottom. 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 both DealerKnows clients and all participating TrueCar customers. (They’ll know soon enough).

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. (At least, it will to those dealers that pay attention to the Per-Sale invoices they receive and attempt to legitimize said charges.)

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:

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 aboard 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 $20g 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.

Click here to view The Write-Off Policy