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20 Things You Didn't Know about TrueCar

Anyone who has purchased a car from a dealer knows how difficult and time consuming the process can be. Just when you think that you've negotiated a fair price, and the paperwork for financing has begun, the salesman handling the deal comes out with "new information" that lets you know that the car is going to cost more than you initially thought. It's a mess at best that can take anywhere from 3 hours to all day or even several days. TrueCar is a platform that is based on technology and information that is designed to make the car buying experience more fun, a lot easier and fair for the consumer who has much better things to do with their time than sit in an auto dealership for hours. It's a cool system but there is a great deal that the public doesn't know about it. To help keep you informed, here are 20 things about TrueCar that you didn't know.

1. Most used car salesmen are not fond of TrueCar

Thanks to TrueCar, more consumers are made aware of the average price that others are paying for specific makes and models and it gives them an extra tool for bargaining with sneaky auto salespeople who are trying to get the highest price possible to increase their commissions. It cuts through the rhetorical nonsense involved with haggling over price and gives the customer more leverage in getting a fair deal.

2. Unlike salesmen, auto dealerships loved TrueCar at first

When the recent recession hit and auto sales began to slump, there were lots of auto dealerships clamoring to become a TrueCar certified dealer. The reason for this is that it increased their sales and helped to move inventory off the car lots to make room for new models. Consumers simply find the model that is desired on TrueCar and print out the voucher which guarantees a low price. This may bypass the enthusiastic haggling of the salesmen and while they're not happy about it because it removes an element of opportunity for them, their employers are happy to see merchandise being sold.

3. Auto dealers did an about-face in their appreciation of TrueCar

By 2012 Auto dealers realized that TruCar wasn't such a good deal for them after all. While it's true that it helped them to move inventory during bad times, the fact of the matter is that after overhead, the profit margin on selling new cars is very low. On average, the percentage of profit is around 3.8 percent. After paying the fee charged by TrueCar, the profit was diminished even further.

4. The Virginia Automobile Dealers Association had it out with TrueCar

Most people are not aware of the fact that the head of the VADA, Donald Hall has been embroiled with fierce battles with the owner of TrueCar. Upon realizing that just moving inventory wasn't getting auto dealers where they needed to be, Auto dealers such as AutoNation and many other large auto retailers saw that the disruption in the industry that is being caused by TrueCar translated into a "death spiral" for many auto dealers.

5. State Auto dealers associations banned dealing with TrueCar

Even after news of the perils of dealing with TrueCar was shared with the owners of auto dealerships, some still stayed on with the agreements they made. Some state associations went so far as to threaten to cut off advertising funds for dealers who maintained ties with TrueCar and sold cars "too cheaply."

6. YouTube videos were made against TrueCar

Because of the impact that TrueCar had on the profit margin of auto dealers, many frustrated salespeople and others in the auto sales industry took to the internet. Their message was clear and united and often expressed with anger from individuals who vented their frustrations on videos that were uploaded to YouTube and other social media sites.

7. Association with TrueCar may violate some laws

Most people are not aware of the fact that some states have enacted franchise laws which are designed to protect car brand dealers from underselling strategies. When an auto dealer sells a certain brand at dirt-cheap prices, it dries up the business for others and it is possible that the integrity of the brand will become damaged, forcing MSRPs down lower. There is a potential that such a price war could put a car brand out of business because of the overhead costs of manufacturing a vehicle.

8. TrueCar had to suspend service in some states

Because of the potential violation of laws protecting auto dealers, TrueCar was forced to suspend its activities in the states of Colorado and Louisiana for a period of time while they revamped their business model. They were accused of being auto sales brokers and while the owner denied that TrueCar participated in broker activities, it could be viewed as brokering a sale because of the fees that they charge when dealers used the vouchers that consumers printed off from the sites to get the best car deals. Now instead of charging a fee for all referral sales, dealers in some states pay a monthly subscription fee, which eliminates any disagreements with the terminology of the laws.

9. Auto dealers and trade associations may have violated federal laws

It's been revealed that the boycott of TruCar among so many dealers and associations may have violated TrueCar's rights to conduct business. The Federal Trade Commission has looked into the situation and has made inquiries. There are competition laws in place and together, there was a major conspiracy to put TrueCar out of business. No official word has been released from the FTC on this matter yet.

10. TrueCar handles business differently from state to state

Because of the laws and regulations in place pertaining to the sale of automobiles, some states have different requirements than others. The TrueCar company is aware of these differences and it has been forced to accommodate the specific laws of a given state by conditing business differently. They strive to maintain full compliance with all mandates that are issued by both state and federal laws.

11. TrueCar's predecessor venture was a failure

Before Scott Painter launched TrueCar, he established a company that had similar DNA. In 1998, CarsDirect was open for business. The goal of the new company was to sell cars directly from the factory to the customers. This cut out the middleman and was intended to save consumers money by avoiding dealer markups. Needless to say, it wasn't something that auto dealers were in favor of. Because of the laws protecting the auto franchise system, his venture failed miserably.

12. TrueCar experienced a major exodus of clientele in 2012

After 2008 and the scare over low sales during the recession, business began to pick up. TrueCar had ult a $40 million business and it was growing and expanding at a rapid pace. All of this would come to an end starting in December of 2011. There was a trend in auto dealers who were dissatisfied with the way that TrueCar was cutting into their profits and limiting their potential for financial growth. By February of 2012, a total of 5,600 certified dealers canceled their agreements with TrueCar. Since dealers are necessary to have a business in the first place, losing a third of them within a two month period was devastating. The total estimated loss for the period was $75 million. The company was approaching the possibility of financial failure within a few months if something didn't change.

13. Painter admitted that he was a "jerk" in the way he set up TrueCar

Scott Painter caused a major loss in revenue through his TrueCar venture. He hadn't really stopped to think about how his actions were affecting others until it was pointed out to him in a therapy session. Upon absorbing the new information and considering how his business model affected other people who are just trying to make a living, he realized that it was time to make some changes. He established a council that is composed of auto dealers and the group meets six times a year. They're charged with letting TrueCar know what they're doing right and what needs to be changed. Painter realized that without the auto dealers he doesn't have a business and he needs to learn to work better with them so everyone's best interests are served.

14. Painter is one hell of a fundraiser

Prior to the launch of TrueCar, Scott Painter set about the business of raising funds to finance the startup of the new business. He's credited with starting several dozen companies, and TrueCar is only one of many. Painter is a savvy entrepreneur and he knows how to get results. He's responsible for raising more than $1 billion in venture funds. This is quite impressive. Of course, not all of the money that he's raised has gone into TrueCar alone. It was split over over the many projects he started.

15. TrueCar received millions in venture capital funding

We earlier talked about how Painter raised more than a billion in venture funding. Although it wasn't all spent to get TrueCar on its feet, there was more than $185 million that was raised for TrueCar alone. This is a spectacular amount and it was gladly given by investors who believed that it would help consumers to save money and meet with success for the services it provided.

16. TrueCar needed to change its trajectory to maximize its potential

The stress of TrueCar's struggles was so great that founder, Scott Painter had to seek out the assistance of a therapist. It was during this time that he realized he was causing a lot of serious problems for the auto sales industry. TrueCar needed the auto dealers to survive and destroying them wasn't a good answer for anyone.

17. TrueCar was too "consumer-centric"

TrueCar initially sought to help consumers avoid paying high prices on vehicles that they purchased. The focus was so one-sided that it only addressed the needs of the public. It didn't take into account that the auto dealers had to make a living. The advertisements were totally consumer-centric and they cast a bad light on auto dealers, making it look like they were all out to screw the public. This needed to change, and after coming to the realization that he was cutting off the arm that kept his business alive, Scott Painter changed the advertisements.

18. Painter realized that he needed to change TrueCar's approach with auto dealer

In addition to offending auto dealers and hitting them in the pocketbook, Painter had not taken the time to sit and talk with them and ask how they could work together for everyone's benefit. He had taken an approach to business that had alienated him with them and it set up an adversarial relationship. When he became aware of the full impact of his actions, he sought to at least attempt to repair the damages. Painter established an advisory group that meets six times per month with auto dealers and it gladly accepts feedback about what TrueCar is doing well and what things need to be changed for the benefit of all. This is a radical change in the way that the business used to be done.

19. TrueCar has undergone a dramatic evolution

Since TrueCar first began, it has undergone a series of changes that have completed in an evolution if you will. Instead of taking on the auto sales industry and making them look bad, it seeks to work on the behalf of the auto dealers as well as for the consumers. Advertisement strategies have been completely overhauled and TrueCar now views the dealers as partners in the industry rather than an enemy of the people. Much of the language has been changed and it now refers to the cooperating auto dealings of TrueCar as "trusted partners.

20. TrueCar faces a tough challenge

Much animosity was built between TrueCar and many leaders in the Automobile industry, but there is a lot of work being done to make reparations and move forward. Scott Painter has even hired a former AutoNation executive to lead the team to extend an olive branch to the auto dealers who were damaged by the previous campaigns launched by TrueCar. While there are many that are happy to accept the offer, there are still those that reject offers of friendliness and collaboration. It's going to take time and some never will come around, but at least Painter is leading TrueCar in the right direction.

Garrett Parker

Written by Garrett Parker

Garrett by trade is a personal finance freelance writer and journalist. With over 10 years experience he's covered businesses, CEOs, and investments. However he does like to take on other topics involving some of his personal interests like automobiles, future technologies, and anything else that could change the world.

Read more posts by Garrett Parker

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