Is this car sales website actually the best way to buy a car?
Consumer groups are getting paid to send you to TrueCar.com, expert says
ORLANDO, Fla. – TrueCar.com has become a popular car-buying website, connecting consumers with new and used car dealerships.
The website touts that buyers will get the TruePrice -- the actual price you will pay at the dealership, eliminating haggling.
But is the TrueCar price the best price?
On its website, TrueCar says it offers a "better price," making no mention of a best price.
"A certified dealer gives you an upfront, discounted price that includes all fees, accessory costs, and incentives," TrueCar writes on its website. "This is your TruePrice -- the price you'll pay at the dealership."
The process is quick and simple. You enter the vehicle you're looking for at TrueCar.com, fill in your personal information and TrueCar reveals TruePrices on cars at local dealerships while passing on your contact information to the dealers.
Kevin Brasler, executive editor of Consumers' Checkbook, a Washington, D.C.-based nonprofit consumer advocacy group, said TrueCar is not giving consumers the best prices.
"The relationship isn't based upon getting you the best deal. It's funneling business to the dealerships," Brasler said.
Brasler said TrueCar is paid by dealerships to send leads, or potential customers, to dealerships.
"Their interest is to keep those dealerships happy, so they have no incentive to offer low prices to customers, because they need to keep the dealers happy," Brasler said.
TrueCar's SEC filing for the quarter ending Sept. 30, 2018, confirms the arrangement.
"Revenues include fees paid by customers participating in the Company's dealer network with which the company has an agreement ("TrueCar Certified Dealers" or "Dealers"). TrueCar Certified Dealers pay the company fees either on a per-vehicle basis for sales to Auto Buying Program users, a per-introduction basis for sales to Auto Buying Program users or in the form of a subscription arrangement ... The company's performance obligation to TrueCar Certified Dealers is the same for all payment types for our Auto Buying Program revenues: to provide dealers with introductions to in-market consumers through the use of the TrueCar platform, so that those dealers have the opportunity to sell vehicles to those consumers," the filing reads.
A TrueCar spokesperson said TrueCar is free to consumers who use the website.
"TrueCar is a digital automotive marketplace that is a free-to-consumer service and provides local market pricing context and real-time dealer pricing on new and used vehicles," a TrueCar spokesperson said.
Brasler said car buyers should also know that reputable consumer groups, such as AAA, AARP and Consumer Reports, are paid by TrueCar to generate leads.
"That's really not the way it should work at all, especially if you've aligned yourself with consumer-friendly organizations, like Consumer Reports and AARP and AAA," Brasler said. "Those organizations have affiliated themselves with TrueCar and are benefiting from this financial relationship."
TrueCar said it does not pay the groups to generate leads.
"In cases where revenue is shared with partners, it enables those consumer-oriented groups to support their missions," TrueCar said. "Several of TrueCar’s largest volume partners reinvest program revenue to support additional consumer benefits, which helps reduce the overall cost of car ownership for their members. TrueCar’s Certified Dealers are very supportive of our partner network and often offer additional discounts to members. Additionally, TrueCar works with auto manufacturers to provide targeted cash incentives typically valued at $500 or $1,000 to partner network consumers."
All three "partners" - Consumer Reports, AARP, and AAA - have links on their websites utilizing the TrueCar service.
News 6 contacted all three.
None would disclose how much TrueCar is paying per referral but AAA and AARP confirmed there is a financial relationship with TrueCar.
AARP spokesman Mark Bagley said the AARP Auto Buying Program powered by TrueCar was launched in 2013 to provide AARP members and nonmembers "a convenient comparison tool" with a "possible savings element."
"Our member research and feedback found that people age 50 and up often find the auto buying process cumbersome, stressful and a hassle," Bagley said. "Please note: We do not assert 'the best possible price.' It is our goal to provide pricing information so members and nonmembers can make comparisons."
Bagley would not say how much AARP is paid.
"Financial terms of the arrangement are confidential, but I can acknowledge that AARP realizes a modest fee on auto sales, not referrals. These funds go to the AARP Driver Safety Program and the AARP Foundation, a 501(c)(3) charity that works to combat senior poverty and isolation."
Consumer Reports spokesman Doug Love said the CR Build and Buy Car Buying Service through TrueCar helps Consumers Reports, a nonprofit organization, "do its work."
"TrueCar pays a fee to Consumer Reports based on cars sold to program participants by participating dealers, without regard to what makes or models were bought, where they were bought or who bought them." Love said. "Whatever amounts Consumer Reports receives are used to help defray the costs of its ongoing work and mission. Consumer Reports does not have any financial relationship with dealers, and the compensation that Consumer Reports receives from TrueCar is not related to the model purchased or to our rating of a specific model."
AAA spokesman Josh Carrasco said that the AAA Auto Buying Program through TrueCar gives members "up-front, discounted pricing."
"Our goal is to make the AAA Auto Buying (Program) user experience haggle and hassle free," Carrasco said. "We cannot disclose our agreement with TrueCar at this time, but according to our data the average AAA member who uses the AAA Auto Buying program saves an average of $3,383 off of MSRP."
Page 23 of TrueCar's SEC filing discusses its relationship with the consumer groups:
"In addition, we customize and operate our platform on a co-branded basis for our many affinity group marketing partners, including financial institutions like USAA, Chase, and American Express; membership-based organizations like Consumer Reports, AARP, Sam's Club, and AAA; and employee buying programs for large enterprises such as IBM and Walmart. We enable users to obtain market-based pricing data on new and used cars, and to connect with our network of TrueCar Certified Dealers. We also allow automobile manufacturers, known in the industry as OEMs, to connect with TrueCar users during the purchase process and efficiently deliver targeted incentives to consumers," the filing reads.
Brasler said getting dealers to bid for your business will yield the best price.
"And we find, on average -- by getting competitive bids on average, we beat TrueCar by $1,300, and sometimes it's thousands and thousands of dollars," Brasler said.
Consumers' Checkbook offers a service for $250 in which staffers will call at least five dealers in your area, letting them know they have one chance to earn your business.
Brasler said staffers will try and speak with the sales manager, or fleet manager if possible, letting them know you're serious about buying a car and that they're seeking bids from several dealers.
"The key isn't even to hire us to do it. The key is getting dealers to compete for your business, to get bids from local dealers to earn your business," Brasler said. "Many of us, when we have our projects at home, like a new roof, you should get bids from local roofers. If roofers know they have to compete for your business, they're going to offer their best prices. And when it comes to buying cars, taking that same approach, getting competitive bids from local dealers, we find will always yield the best possible prices on cars. This is something you can do yourself as a consumer."
TrueCar said it does not charge a fee to consumers for its services.
"Consumers want real prices on actual cars," TrueCar said. "At TrueCar our dealers provide VIN-based pricing on in-stock vehicles, with all dealer fees included so that consumers and dealers are on the same page. Over 60 percent of shoppers purchase a different vehicle than they were originally considering once they are at a dealership. On TrueCar, consumers are free to compare and see transactable prices on multiple makes and models, in real time, at no cost to them."
In addition to its fee-based CarBargains and LeaseWise car-shopping services, Brasler said Consumers' Checkbook also posts free step-by-step instructions on how to contact dealers and get them to bid for your business.
"This is something we've been preaching for 30 plus years years now. This is the way to buy a car. It's a proven method. It's the way people should do it," Brasler said.
Brasler said getting dealers to compete for your business often yields prices below dealer invoice price, not just the manufacturer's suggested retail price, because dealers will pass on factory incentives and rebates that you may not know about to earn your business. The dealer invoice price is how much a dealership pays the factory for a car, not including rebates or incentives.
TrueCar said its customers do not want to use a 30-year-old method.
"That over 1 million people used TrueCar to purchase a vehicle last year stems from the fact that the modern consumer does not want to purchase their vehicle using a 30-year-old method," TrueCar said. "They want transparency and pricing context. When you know what others paid in your area for the car you are considering and you receive competitive upfront pricing from up to 3 dealers, you don’t need to pay a broker."
A Trucar spokesperson said it regularly provides pricing thousands of dollars below MSRP.
"On average, the new car prices offered to consumers through the TrueCar platform tend to be thousands of dollars below MSRP, and at or below the market average transaction prices in the consumer's local area," a Trucar spokesperson said. "This is so because dealers who price into the TrueCar system know that our platform enables consumers to readily compare those prices to what other people paid."
"TrueCar dealers are contractually required to honor the price offers delivered to TrueCar users through our platform, but TrueCar users can and sometimes do choose to negotiate with the dealer to obtain an even lower price," a Trucar spokesperson said. "However, TrueCar enables its users to easily and instantaneously receive upfront market competitive price offers without negotiation, which is a very significant benefit to both consumers and our participating dealers."
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