Are True Car or other 3rd Party Referrals Worth It? – An Editorial

An editorial from Guest Blogger: Scott Rossi

In my role at Strong as VP of Digital Services, I pride myself on being informed. As a 27 year veteran of the retail automotive business, I am also proud of everything this business is. But, there are some things that every auto dealer should know and understand the threat it poses. A commentator named, “Watching” is spot on, in his/her observations of True Car as seen as a comment on this Automotive News article. Are these 3rd party referral companies worth it?

TrueCar is a company that started out charging dealers $299-$399 for each customer “introduction.” “Don’t pay us $20 per lead, only pay us ($300-$400) when you make a sale” – that was their sales pitch to dealers. Sounded good…dealers played along (because 3rd party lead closing ratios were so bad)…and TrueCar was born. Then with all their referral fee money, TrueCar hit the airwaves, with a “trust US, NOT your dealer” message to get traffic to their site – dealers got in an uproar, and TrueCar changed its message because the uproar almost put young TrueCar out of busines

TrueCar weathered that storm, and got so big, that it now has no fear in the way it treats/charges dealers, claiming credit (and their $300-$400 referral fee) for sales that didn’t necessarily originate from TrueCar websites. Here’s just one example: if a customer has been servicing their car at a particular dealership for, say 2 years, and visited TrueCar while researching about trading in, and ultimately bought their new car from the dealer they had the service relationship with – did they buy at that dealer because of TrueCar’s “introduction” or because of the customer’s 2-year service relationship with this dealer? TrueCar says that the customer bought at this dealer because of their “introduction,” and they won’t budge from charging that dealer $300 for “introducing” that customer to the dealer despite the dealer’s 2-year history with this customer. That’s just one example of their – “I’m in your DMS and I’m claiming your customers as mine” attitude. Dealers around the country should WAKE UP and cancel their relationship with TrueCar. Audit your monthly TrueCar bill against the history you have in your CRM/DMS for each customer that TrueCar is charging you for and you’ll see what I mean.

Why we are letting this middleman get between us and our customers is beyond comprehension! TrueCar made $58M in the first quarter? $58M that dealers chose to pay out as commissions to this middleman? We don’t need them. Are we crazy?

Customers will still buy cars from their local dealers. If enough dealers cut them off, TrueCar will will go bankrupt and disappear, and dealers can put their $58M back into their operating accounts where its needed to help pay for overhead and the wages of our valued employees. Let’s give our employees the $58M, not TrueCar.

Now, even worse, TrueCar is creating a new product called TrueCash, so TrueCar can now convince MANUFACTURERS into paying EXTRA incentives to “demographically targeted consumers” that the manufacturers may want to win-over? Are the manufacturers crazy too? Why would they want to help TrueCar assert itself as the place to get more incentives than those generally available by the manufacturer’s own website or through their dealer network?

I can foresee TrueCar’s next TV or radio commercial – “looking for a new car? some Car Brands want certain targeted buyers in your area so bad, we got them to offer you thousands in extra rebates exclusively on TrueCar if you fit their target profile. So before you buy your next car, go to TrueCar to see which brands are willing to offer YOU thousands more.” In effect, what TrueCar is saying is – forget Toyota.com, Hyundai.com, Nissan.com, Chevy.com, etc…don’t waste your time going to manufacturer or dealer websites to see special offers….only go to TrueCar.com – the extra rebates are ONLY there… The 13 manufacturers said to already be supporting this “TrueCash” scheme better wake up and pull out of this. Do manufacturers want TrueCar to be a middleman between consumers and themselves also? Whose customer is it? TrueCar’s? or Toyota and its dealer’s? TrueCar wants the customer to be theirs – not the manufacturer’s or its dealer. Are we crazy to give them control over our customers? Why are we giving the middleman control? We need to WAKE UP, as an industry, and pull out from doing business with TrueCar.

By the way, how would this “TrueCash” scheme not put manufacturers in violation of state franchise laws? Doesn’t it create a system where cars sold by “TrueCar dealers” are offered at a lower price than a non-TrueCar dealer can offer. For example, if there are 5 dealers in a metro area and 3 are crazy enough to be on TrueCar and 2 are not, the 3 dealers on TrueCar get to sell their cars with an extra “TrueCash” rebate, but the 2 non-trueCar dealers don’t? That sounds like two-tiered pricing to me. A Chevy Cruze from a “TrueCar dealer” would have $2,000 in available manufacturer rebates, but the same car from a “non-TrueCar Chevy dealer” down the street can only be offered with the manufacturer’s ordinary $1,500 rebate? Manufacturers can’t take part in a scheme that lets certain dealers sell their cars for a different price than other dealers. I’m confident that would violate franchise laws and/or dealer agreements, and even if not, it’s totally crazy, to let a middleman have exclusive rebates that only the middleman and ITS dealers can offer. Am I a Toyota dealer, or am I a TrueCar dealer? Am I a dealer in Toyota’s dealer network or am I now to consider myself as a dealer in TrueCar’s dealer network? Hello? Do you fellow car industry dealers and manufacturers see what’s going on?

What are we letting this TrueCar entity turn into? What, do want to let them take over the car industry? Are dealers, and now manufacturers, crazy? Why are we letting TrueCar become the place to buy a car, and not OUR own websites and dealerships???? Would you INVITE a middleman sit at the entrance to your dealership, let them talk to your customer before he walks in, empower the middleman with an exclusive coupon to give your customer (to suck an extra rebate out of your desperate manufacturer) and, then, on top of all that, pay the middleman a $299 “introduction” fee for talking to your customer outside your door? If you are a “TrueCar dealer” or “TrueCash manufacturer” today and you are reading this, that’s exactly what you are doing….

Let’s cancel TrueCar en mass and kick this greedy, and now fearless, middleman away from the entrance to OUR stores and websites and put it out of business.  Consumers will still come to us for their cars – we don’t need to give control to a commissioned middleman. We need to stop this. We can compete with our fellow dealers and brands without the TrueCar middleman.

Ladies? Gentlemen? Are we smart enough to put a stop to the TrueCar monster? Ihope we are…start by auditing your TrueCar invoices against your CRM/DMS history for each customer that TrueCar charges you $299-$399 for as their “introduction,” you’ll probably be shocked at which customers you are paying them big money for – in a good portion of cases, customers that are already in your system or that came from other advertising sources that you pay for. That’s what you will find, and they won’t waive those charges when you ask them to, as they are now so big, they are fearless. Can’t wait to see what’ll be next. When that customer gets back in a trade cycle, guess who’ll be marketing to them…you guessed it – TrueCar…they’ll invite your customers to trade in at other dealers or at other brands….after all, it’s TrueCar’s customer now, not the brand or the dealer’s…..we were stupid enough to hand over control…The implications of letting TrueCar be who they are, are so widespread, it should scare the living skit out of every dealer, state dealer association, NADA, NIADA and manufacturer rep that is reading this….Someone in a high position, wake up and spread the word – don’t be scared – the implications are WAY too big.

Dealers, speak up at your local dealer marketing or state association meetings, we can turn TrueCar away one market at a  time, and the manufacturers should wake up, smell the coffee and LEAD the charge.

Dealers, manufacturers, why the heck are we ENABLING & PAYING TrueCar to take our customers away from us? Let’s reverse course and stop the madness!!!