There’s no denying that consumers want to be more involved and well-informed before making big purchases. Comparison shopping and online research has become the norm for people before they buy anything from stereos and home appliances to motorcycles and cars. For those shopping around for a new car, that has traditionally meant checking out safety features, third-party ratings and reviews from owners.
Then TrueCar came along.
TrueCar has made it their aim to offer true transparency in the car market by letting customers know how much a car is worth and how much others in their area have paid for a specific make and model. This has given customers more confidence when talking to car dealers and, in many ways, it has also made it easier for dealers to communicate with customers since everyone is essentially on the same page in terms of what a car sells for locally even if the national average is higher or lower.
Now, TrueCar is looking to take this transparency model to the next level.
TrueCar recently entered into a “memorandum of understanding” with R. Hollenshead Auto Sales and Galves Market Data (a Hollenshead subsidiary) to test out a new platform called TrueCar Trade. The platform, which would initially be rolled out in a handful of limited markets, would offer “completely transparent valuation process designed to revolutionize appraisals and valuations for dealers and consumers,” according to a statement issued by TrueCar.
The benefits to the consumer are pretty plain to see. The TrueCar Trade platform would compare trade in values drawn from their own database as well as through Galves Market Data in order to give customers a ballpark figure on how much their trade is worth. Those customers can then go to car dealers and negotiate with greater confidence.
So what’s in it for the dealers?
To be sure, dealers have viewed TrueCar with skepticism since its inception. Initially, several companies even sued the website and did force a change in the way TrueCar does business. Even after those changes went into effect, many dealers were still wary of the TrueCar model. Still, over the past decade, TrueCar has grown into a force to be reckoned with and one which many dealers now say can work in their favor.
The biggest asset TrueCar brings to the table for both buyers and dealers is trust and mutual understanding. Customers feel more empowered and well-informed and dealers have some insight into what the customer expects. But, as with anything else online, there is something lost in translation when you are dealing with a machine – or an advanced algorithm – as opposed to an actual human being.
TrueCar certificates and price reports for buying cars are littered with disclaimers. Even with TrueCar’s flagship service of vouchers for car buying, they are quick to point out the price may not always hold up once you’re in the showroom. On the TrueCar FAQ it advises customers that dealers “may not have an exact match for the car you are looking to purchase. This is not the dealer’s fault, but rather a challenge with the way cars and trucks are manufactured and marketed. […] So it may be helpful to keep an open mind about what the dealer may be offering as an alternative.” So in this light, the TrueCar estimate can be an effective way to get people into the dealership, ready to buy and open to alternatives if the exact model isn’t there or if they see something similar that appeals to them.
This tenuous relationship between dealers and TrueCar has worked for a little over a decade now and many dealers are happier with the arrangement. Still, TrueCar’s ambition to bring that same level of transparency to used car trade-ins is a cause of concern for many dealers.
The fact of the matter is, while there are a limited number of issues that can affect the cost of a new – or newer – car being bought from a dealership, giving estimates on cars held by private people is an entirely different matter. The TrueCar Trade platform says it will develop an estimate based on the most common factors that affect a car’s trade-in value:
- Overall condition
- History reports
These have been the go to metrics for dealers and drivers alike for years. Kelley’s and Edmund’s have both offered estimates and values on used cars for generations using these metrics so the idea is that one offered through TreCar should be no different.
But critics point out that TrueCar promotes itself as giving people a report or voucher that they can take in and get redeemed at a participating dealership, no questions asked. This can get the entire transaction off on the wrong foot as we all know any number of other factors can affect a car’s value. Not only are some things relative (one man’s ‘Good’ condition is another man’s ‘Fair’) but it leaves out questions about after-market additions. Sure, that 2010 Altima is in great shape – but that after-market stereo, ground effects lighting and LED headlights can shave thousands off an offer. Finally you have issues which affect a car’s value that may simply never occur to a driver looking to trade-in. Seasonal changes could make a 4×4 more appealing – and thus more valuable – in the winter but good luck getting that same deal in the middle of July.
At the end of the day, TrueCar and its transparency model have already changed the car industry in many ways. Customers are not only more aware of the cost of cars and what goes into a price, they are now also aware that dealers have come a long way from the gold-chain wearing, manager checking and time wasting cliches of the 70s. This alone has made life easier for dealers who truly want to do right by their customers. While there is plenty of room for potential problems with applying the TrueCar template to the trade-in market, there is also room for a number of benefits.
TrueCar Trade is poised to begin rolling out in eastern Pennsylvania, northern New Jersey, lower New York, Connecticut, Rhode Island and Massachusetts within the year. If all goes well, it could easily go nationwide. The company is banking on it becoming a way for customers, dealers and re-marketers to work more efficiently and with greater transparency. We’ll be watching.