Consumer Reports Promotes "Not So" TrueCar Data

Consumers Beware

Auto Central, January 4, 2013; TrueCar revenue is derived from commissions on sales of new cars from their affiliated car dealers. To increase traffic and establish themselves as a consumer friendly honest broker they have invested in providing "free content" to various content providers, including Consumer Reports, an organization that we have always believed was beyond reproach. ON January 2 we received the letter below from Automall Networks, a company that offers a straight forward consumer new car buying service, but unlike TrueCar at a flat fee, not a hidden commission from new car dealers. We thought it important that our audience be made aware of the truth behind the TrueCar business model.

Below you will find;
1. Letter from Automall Network
2. Sample New Car Purchase Report from Consumer Reports
3. Consumer Reports "Powered By TrueCar"
4. Consumer Reports Data Disclaimer

Letter Re Consumer Reports from Automall Network

January 2, 2013

Robert Gordon, Co-publisher
The Auto Channel
332 West Broadway, Suite 1604
Louisville, KY 40202

Dear Mr. Gordon

Here is a copy of a letter that we sent to Consumer Reports concerning their endorsement of TrueCar data.

As a consumer, consumer advocate, Consumer Reports’ subscriber and an industry professional, I am writing to you about Consumer Reports’ New Car Pricing Service. As I understand it, the underlying data for this service is provided by TrueCar. While I very much like the principle behind the business model, as an industry professional who negotiates car deals for consumers for a living, I am uniquely qualified to validate whether the actual implementation is the right thing to do for consumers and whether the pricing is actually “true”.

I have been an auto broker for about 12 years and in Canada, our company also has had a dealer’s license for about 6 years. From the onset, our company decided that we were not going to operate like a dealer, rather work for the buyer. In real estate, people hire a broker to help them navigate the complexities of the home buying process, source the right home and negotiate the best deal on their behalf. We do the same for car buyers. However, unlike real estate brokers who charge a percentage of the selling price, we charge a flat fee for our services regardless of the price of the car. The percentage approach is a conflict of interest since the broker makes more if the selling price is higher thus creating an incentive to keep the price higher. We provide the services of sourcing and negotiating at a fixed low fee and every dime of discount goes back to our customer.

When lead generation services like TrueCar charge dealers a referral fee, those fees are built back into the selling price. In fact, in many situations, there is quite a bit more than the referral fee built back in. By being compensated by the dealer, the service is actually working for the dealer and only marketing that they are working for the buyer. It is truly unfortunate that a “free” service sounds so attractive to consumers, most of whom actually believe it, however we all know that it is actually quite misleading.

It is my understanding that TrueCar charges their dealers $300-400 per transaction if the buyer goes through and completes a deal. That information is not disclosed to the consumer nor is the fact that the referral fee is built into the price supplied by TrueCar’s preferred dealer. Once in the dealership, there is negotiation, upselling and maybe even bait and switch that takes place. Even if the customer does not go through the TrueCar dealer, they are now under the misconception that the pricing supplied is a real benchmark.

Our company also provides a service for those that want to do their own negotiation. We provide a neutral and totally transparent Market Price Report that identifies what someone should realistically be paying based on our market studies, mystery shopping and direct negotiations for other clients. This report costs $50 but is a real representation of what is competitive in the market. Unlike TrueCar, we do not receive compensation from dealers and pride ourselves on being a totally neutral service. Consumers can use this information as their real benchmark to negotiate with whichever dealers they like. And if they are not able to negotiate a price within the range we have specified, they can upgrade to our Full Concierge Service. We will either make it happen for them or we’ll pay the difference.

Considering Consumer Reports’ reputation of being a totally objective provider of comparative results and ratings, I think they can do better for their subscriber base. Although they themselves are offering a flat fee report program, I hope they don’t realize what is happening behind the scenes, because if they are extending this service with all its shortcomings knowingly, then my faith in their integrity is gone.

Regards,

Viraf Baliwalla
Automall Networks
(866) 310-8701 x303

Consumer Reports New Car Report Sample HERE

TrueCar Data on Consumer Reports New Car Price Report

So who's data is it anyway?

Copy of Consumers Report disclaimer (Bottom of sample page)

The material provided in this report is gathered by Consumer Union from its own resources and outside experts.

Copyright � 2012 by Consumers Union of U.S. Inc.
Careful attention has been given to this report's accuracy and completeness. However, Consumer Reports assumes no responsibility for errors or omissions and all prices are subject to change without notice.

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