TrueCar Inc. sees a 60-percent surge in vehicles sold by participating dealerships in 2013 from the shopping site, to around 400,000 units, according to chief executive Scott Painter. He said that TrueCar now has 6,600 participating dealerships and is adding more to expand its geographic coverage. The company only had 3,200 franchises in 2012, no thanks to some regulatory issues.
According to Painter, TrueCar is profitable and participating dealerships are earning more from TrueCar leads. He said that average gross profit on lead sales has surged $100 per new vehicle to $350. He told Automotive News that TrueCar has shifted its marketing emphasis from offering the lowest price to the consumer not overpaying.
Painter led TrueCar's transformation in 2012 after the company was forced to temporarily suspend operations in several states to fix regulatory concerns on its advertising and pricing practices. As a result of the suspension, TrueCar posted $75 million in losses in 2012 on around $85 million of revenues. Painter got rid of the aggressive bidding among dealers for TrueCar customers, in which dealers could see the bids of other dealers.
Now, dealers offer prices to TrueCar customers without knowing the bids of their rival dealers, Painter said. This allowed dealers to earn more from TrueCar customers than they did under the discarded system.
According to Painter, average transaction prices are currently in the 30% range of lowest prices in a market, compared to just 5% under the old system. TrueCar also managed to comply with consumer and pricing laws in all states by mid-2012, Painter said. TrueCar operates using a pay-per-sale model, in which dealerships pay TrueCar $299 for every new vehicle sold and $399 for every used vehicle sold to TrueCar customers.