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TrueCar aims to foster hassle-free auto deals

TrueCar Inc., through their website, publishes data on actual auto sales alongside listings for similar new and used vehicles, allowing shoppers to lock in good prices while preserving dealer profits.

Hyundai auto sales truecar 3222013Enlarge
The new Hyundai Gran Santa Fe is displayed in a world premiere at the Korean automaker's booth on March 5, 2013, at the Geneva Motor Show in Geneva, Switzerland. TrueCar Inc., an 8-year-old company based in Santa Monica, Calif., publishes data on actual auto sales allowing shoppers to lock in good prices while preserving dealer profits. (Sebastien Feval/AFP/Getty Images)

A photo on TrueCar.com shows a young couple, identified as Connor and Julie of Santa Barbara, Calif., standing next to a Hyundai Elantra Touring that they purchased, the caption indicates, for about $3,000 less than the manufacturer's suggested retail price. "Never overpay," the company urges in big font.

TrueCar Inc., through their website, publishes data on actual auto sales alongside listings for similar new and used vehicles, allowing shoppers to lock in good prices — average savings of $2,500 off the manufacturer's suggested retail price for new cars, the company says — while preserving dealer profits.

Based in Santa Monica, Calif., the 8-year-old company promises a hassle-free car-buying experience from a nationwide network of more than 5,500 certified dealers, which it says have sold more than 706,000 vehicles through the site, saving buyers $1.75 billion.

Thilo Koslowski, vice president and lead automotive industry analyst at Gartner Inc., said TrueCar is disrupting auto retailing by giving consumers insight into pricing while playing nice with its network of dealers.

After retooling operations last year in response to dealer complaints and discussions with state regulators, TrueCar appears to be regaining momentum. In the past 12 months, more than 2,000 dealers have joined or rejoined the service, a TrueCar spokesman said.

In November, the company announced that Deloitte & Touche had ranked TrueCar 99th on its Technology Fast 500 list of the fastest-growing North American technology, media, life sciences, telecommunications and clean technology firms. The company had been 63rd on the list a year earlier, before its overhaul.

Deloitte considers companies on the list to be "ground-breaking" enterprises that are reinventing the way people do business. Here, in brief, is how TrueCar works.

(Read more: Need technology experts? Try rural America)

Consumers go to the site and click on the particular makes and models they want to buy. TrueCar will show the MSRP, the factory invoice price, the average price that other consumers actually paid for the model, a TrueCar price estimate and anticipated savings off the MSRP.

Shoppers can view price estimates from certified dealers in their area and print a certificate to lock in "guaranteed savings" and present to the dealer.

The site, which offers a similar service for used vehicles, provides customized deals for members of affinity programs associated with AAA, American Express, Consumer Reports, USAA and hundreds of other insurers, lenders, employers, credit unions and organizations.

"Consumers are changing their behavior and as a result dealers must change how they go to market and sell," TrueCar CEO Scott Painter said recently. "There's not just a new generation of customers, … there's a new expectation around what an auto shopping experience should be as a result of the new technology."

A decade ago, he said, the new availability of product information on the Internet "changed consumer behavior, where they no longer go into an auto dealership to get consumer information about a car." Consumers instead could gather that data anonymously on the web, Painter noted. "That's had a huge impact on the dealers."

Having pricing data on what others have paid provides consumers easier insight into what price is fair, he said.

Consumers may not realize, Painter said, that "15 percent of all new cars are sold at an absolute loss." Since more than 70 percent of transactions involve trade-ins and 90 percent involve financing or leasing, dealers can use trade-ins and financing or leasing arrangements to make up for money lost on the sale, he said.

TrueCar can help dealers avoid selling at a loss, he said. The costs of traditional marketing, commissions, overhead and depreciation can add up to $2,000; by using the site, dealers can cut those costs significantly while offering customers an attractive deal and making a profit, Painter said.

"The dealers that are on our program are actually making money today and we can measure that," Painter said.

TrueCar uses a transactional business model, receiving a flat fee of $299 on new-car sales and $399 for used cars, except in states where pay-for-sale business approaches aren't allowed. An average dealership typically spends $700 to $900 per car on marketing so they can cut marketing costs in half on a sale and pass some savings to customers, Painter said.

The company has been in hypergrowth mode for eight years, doubling in

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