TRUE CAR and ZAG Cyber Bandits, Parasites or Good for the Car Business?
Jim Ziegler asks...
I am hearing a lot of discussion about True Car and ZAG. I continually scratch my head and wonder if desperate dealers are doing the marketing limbo "How Low Can You Go?"
Are we so bad at what we do that we have to line up and pay vendors to lose money? AND, who is giving these people access to your data that is used against you?
Who owns these companies and what might be their ulterior motive? Sometimes I ask questions to which I already know the answer.
Am I wrong?
What do you think... JIM
Jim Ziegler's Guidance and Recommended Action Plan:
Ten Areas We Need to Concentrate on to Bring This Monster to It's Knees...
- Government investigation of ALL Data Aggregators taking consumer information from dealers' DMS. Sadly enough, dealers who do business with TrueCar are exposed to liability charges. Cut off all access to unecessary data, no matter who takes it from the dealers DMS and make it illegal to "resell identifiable consumer data" and "transactional data".
- Educate Your Fellow Dealers; If anyone takes financial transactional data, they expose the dealer that allowed it to violations, especially if it is passed on to other vendors or shared.
- Educate Consumers to what they're doing with their information...
a. You buy a car from a dealer, do you really want your personal information, and maybe even your financial information, passed along and sold and shared by "God knows who?"
b. These People Charge the Dealer $300 which the dealers have to build into the deal
c. Your Privacy and the Security of your Information could theoretically compromise your identity if you do business a company that takes data from the dealership. - Educate Investors and potential investors they could possibly be mislead if anyone is telling them this is a safe investment because of all of the dealers pushing back, associations pushing back, and government regulators in many states coming after TrueCar's business model as NOT compliant, in some cases they're saying it is Not Legal.
- AMEX, USAA and all of their affiliates do not want the bad consumer relations this push back is creating with their members and customers.
- Cancel your dealership's Affilation with TrueCar. Tell people with TrueCar certificates that YOU don't honor TrueCar and you feel the company is NOT reputable. Educate consumers as to perceived data exposure if they buy from a TrueCar dealer. Make sure that each consumer knows that using TrueCar actually increases their vehicle cost by $300 to $400.
- Make the dealers selling at huge losses take all of those deals. Big problem right now is too many Nissan Dealers and others are taking huge losers to get the factory money. The TrueCar reverse-auction business model will continually push those numbers down until the factory money is non-existent. Consumers need to hear from many dealers, "We don't do TrueCar"
- Keep calling your National and State Dealer Associations demanding they get involved and stay involved... No excuses.
- Get the Manufacturers into the game. If GM, Ford, Toyota, and other majors change the rules about how we advertise and do business to protect the dealers, we can cut off their ability to set pricing. So keep it up at every dealer meeting. Call your Dealer Council Members and protest to your factory reps. Tell the manufacturers, if they want showroom and facility improvements, we need the ability to make fair profits.
- Tell everyone you know. Educate other dealers and industry people. Watch the Painter interviews... I believe this is the first time a vendor has publicly announced they intend to bring down the dealers and hijack our business, taking our profits and starving us out with our own data. Painter has said manufacturers and dealers should go bankrupt and he, in his God-like way "will control distribution..."
When the TrueCar-Yahoo Deal kicks in we need to stand firm and "Just Say No" we don't honor TrueCar deals.
Read this article as a reference: http://www.autonews.com/apps/pbcs.dll/article?AID=%2F20110831%2FFIN...
AND, if you doubt the mission... read this... http://www.zag.com/websiteASSETS/whitepapers/ZAG-WhitePaper3.pdf
Comment
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Comment by Jim Kristoff on January 2, 2012 at 6:48am -
(part 3).................
For instance, is TrueCar a lead service, such as Autobytel, which gathers leads and sells them to dealers? Or is it a different animal that operates like a broker?
TrueCar acknowledges confusion about its business model.
"We are certainly open to changes that enhance our ability to comply with a particular state's needs and to more accurately reflect what we do," the company said. "TrueCar is not a broker, traditional advertiser or lead generation company. We do not arrange or negotiate sales for dealers, nor do we advertise vehicles for sale.
"Rather, TrueCar is an Internet marketing company -- the dealer's window through the Internet to customers searching for vehicles."
On Dec. 15, Colorado regulators issued an opinion that TrueCar's materials and Web site violate several state regulations, including advertising rules, and could lead to "bait-and-switch" scenarios.
Among the advertising problems are use of the term "invoice" and failure to include all costs in the advertised vehicle price, state regulators said.
A bait-and-switch occurs when a consumer who has been quoted a specific price arrives at a dealership to find the vehicle already sold or otherwise unavailable, and the dealer then tries to sell a different vehicle.
The Colorado Department of Revenue said dealers ultimately are responsible for any violations. For dealers, that could mean fines of as much as $10,000 per occurrence and possible license revocation, said Tim Jackson, president of the Colorado Automobile Dealers Association.
The state also said it is concerned that TrueCar could be engaging in unlicensed sales.
"It's very serious," said Jackson, who used the attention-grabbing method of certified, return-receipt mail to send association members a bulletin on the TrueCar issues in mid-December.
"We didn't want it to end up just as another memo on the desk for dealers who may not be aware that this process is putting their dealership's compliance and potentially their dealership licensure and that of their salespeople at risk."
Lee Payne, a Honda and Hyundai dealer in suburban Denver, has stopped TrueCar transactions but did not cancel his relationship with TrueCar when the regulatory challenge arose. He had been using it at his Honda store for just a few weeks.
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Comment by Jim Kristoff on January 2, 2012 at 6:48am
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........(part 2)....
The intensified scrutiny from regulators wasn't the only bad news in December for TrueCar and Scott Painter, the company's ambitious and charismatic founder and CEO. Group 1 Automotive Inc., the fourth-largest U.S. dealership group, told its 42 dealers who were participants to sever their ties with TrueCar. Group 1 said it objected to TrueCar's access to its dealerships' computer systems and also questioned the cost.
And now the regulatory concerns are causing some dealers to drop TrueCar.
California megadealer David Wilson decided to drop TrueCar two weeks ago because of legal risks. After doing some research, he concluded that any dealer in California who sells a vehicle through TrueCar is breaking the law.
Wilson, who had been using TrueCar's services at three of his 16 stores, also said he had sold just 15 cars through the company in the past six months. He said TrueCar adds no value to a transaction and wants to be paid more than what the dealership nets on a sale.
"Why do I want to put myself in jeopardy for that?" he said.
TrueCar said its service accounted for about 250,000 U.S. auto sales in 2011, about 2 percent of the estimated 12.7 million-unit U.S. market. But the Yahoo agreement should expand TrueCar's influence significantly in 2012.
Here's how TrueCar works: A shopper on TrueCar.com chooses a vehicle and sees information labeled as invoice price and dealer cost. The shopper then specs out a vehicle, and participating dealerships near the shopper's home offer prices, which can be below TrueCar's invoice price. TrueCar says the offer includes all fees but no taxes, and has no expiration date. The dealer pays TrueCar $299 for every completed new-car sale.
Over the years, consumers or dealers prompted state legislatures to pass laws to ban practices such as bird-dogging, which is paying fees to third parties for leads that turn into sales; brokering, which is charging a fee to a retail customer to find and negotiate the purchase of an auto; and using the word "invoice" in advertising.
Now, in the era of Internet leads and marketing, the question becomes: Is TrueCar merely offering prohibited services in a new form? Or, as the company contends, is it offering a new, and misunderstood, business model that does not violate existing laws?
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Comment by Jim Kristoff on January 2, 2012 at 6:47am
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States wary of TrueCar's methods
Dealers warned of penalties; company says it will comply
and
Follow David on
and 
Automotive News | January 2, 2012 - 12:01 am ESTTrueCar, the Internet auto shopping service, casts itself as an innovator battling entrenched industry methods. And now it indeed is colliding with many long-standing state laws designed to protect the interests of car dealers and shoppers.
Regulators in Colorado, Wisconsin and Virginia have issued bulletins to dealers or sent letters to TrueCar concluding that legal problems exist with TrueCar's business model of charging dealers for leads that turn into a sale.
And dealer associations in three more states -- California, Kansas and Ohio -- say members who use TrueCar may be violating state law.
The legal questions, which could affect a significant number of TrueCar's dealership clients that represent 5,200 or so franchises in 49 states, come at a critical time for the company. On Jan. 1, TrueCar was scheduled to become Yahoo.com's partner for auto shopping. TrueCar agreed to pay Yahoo $150 million over three years.
The partnership will expand TrueCar's reach greatly, and it is recruiting dealerships to handle the additional business.
But the state regulators and associations say TrueCar dealers could face stiff financial penalties for potential violations of state laws governing advertising and so-called bird-dogging, or paying a third party a fee that is contingent on a sale. And regulators in at least two states say TrueCar lacks the appropriate licenses.
Last week TrueCar said in a statement that it has been contacted by regulators in six states: Colorado, Louisiana, Nebraska, Kansas, Virginia and Wisconsin.
"TrueCar continues to work directly with regulators to ensure that at no time will our dealer partners be in violation of any laws by participating on the TrueCar network," the company said.
"We're in the process of making meaningful changes to the service, which will be completed by the end of January 2012, in order to address specific concerns raised by regulators."
While TrueCar has its critics, some dealers are happy with its service.
Jeff Kotlarek, Internet sales manager at Taylor Chevrolet in suburban Detroit, said he typically offers his vehicles to TrueCar customers at $100 below invoice price.
But vehicle sales from TrueCar leads can generate a substantial profit, he said, when customers buy accessories, warranties or features, such as moonroofs, that they didn't originally request.
A tough month
The intensified scrutiny from regulators wasn't the only bad news in December for TrueCar and Scott Painter, the company's ambitious and charismatic founder and CEO. Group 1 Automotive Inc., the fourth-largest U.S. dealership group, told its 42 dealers who were participants to sever their ties with TrueCar. Group 1 said it objected
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Comment by Thomas A. Kelly on January 2, 2012 at 6:43am
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Many of AutoNews direct questions go unanswered in this article dated 1-2-12. It appears TC will challenge some states on some issues. One statement stands out to me....."TrueCar is not a broker,....." isn't there a video floating around where Zag, now TC, said they should be thought of as a broker among other things?
http://www.autonews.com/apps/pbcs.dll/article?AID=/20120102/RETAIL0...
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Comment by David T. Gould on December 30, 2011 at 8:50pm
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Great job Jim with keeping this up to date and the heat on. Currently, Indiana does not have a consumer privacy rule? Whoa.
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Comment by James A. Ziegler on December 30, 2011 at 6:36pm
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Look for three additional states to issue statements next week.
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This just forwarded to me from Auto Dealers Association of Indiana.
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Happy TrueNew Year
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Comment by Stan Sher on December 29, 2011 at 7:47pm
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TrueCar just had hit some dealers in California calling me and emailing me with internet inquiries. Dealers are calling me thinking I submitted a lead. It might be time for me to get my attorneys against TrueCar and Scott Painter.
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I got a great idea. TrueCar needs to stop going into the DMS and figure out a better way to track who purchased. Also, TrueCar should allow dealers to add prep, destination, equipment, etc... fees. Let the dealer profit $1000-2,000 per unit and everyone is happy :)
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