To My Web Site Visitors and Prospective Customers:
As the owner and hands-on leader of this two-person information service, I’ve got 20 years and over 60,000 learning hours in this business. We’re the only new-car info source who takes no money from the auto business. Even Consumer Reports now gets substantial revenue when its fans buy cars through TrueCar’s dealer network, in stark contrast to its claim that it “avoids even the appearance of endorsing a product or service for financial gain.” (I call that hypocrisy.) Sadly, I’m the only one with both the knowledge and the guts to tell you truth.
EXPOSED: THE GAME-CHANGING TRUTH ABOUT THE DEALER INVOICE PRICE
In response to the sudden easy access to invoice prices when the Internet arrived in 1995, the industry launched an ongoing undercover program that has totally "redesigned" the automaker-dealer financial relationship. That's been done by continually raising the invoice price by more than the sticker price to disguise big profit dollars as "dealer cost" dollars, cutting the visible gross profit difference between the two dramatically and turning the invoice price into a bloated imposter.
Those disguised profit dollars are funneled back to dealers in a myriad of truly-secret “below-the-line” incentives programs that are typically based on total sales objectives set dealer-by-dealer, not connected to the sale of any individual vehicles.
These programs usually cover several months, and the rewards are often six- or seven-figure incentive checks. And no source can tell you any dealership’s objectives, where it stands against them, or when these programs start or stop.
As a result, the dealer invoice, even after subtracting “holdback” (which has already been dropped by Audi, BMW, Land Rover, Lexus, Lincoln and Mercedes and is headed for extinction), has little or nothing to do with any dealer’s “true cost” .
This bombshell fact invalidates all the invoiced-based car-buying advice and “target prices” you're finding everywhere on the Internet.
To see the incontrovertible proof of how, year-by-year, the invoice price has been turned into a bulging pretender, click here. If that 47-vehicle exhibit doesn't convince you this the core fact everyone else is hiding, nothing will.
If the published invoice price were anywhere near a “true cost” number, there wouldn’t be a single profitable dealership, even if we all paid that full sticker price!
There’s not a single vehicle today with more than a 10% “gross profit” difference between the invoice price (that dealers do pay initially) and the sticker price (that almost no buyer pays.) The industry average is just 6% to 8%. It’s only 7% for Mercedes, 4% to 5% for Volkswagen.
But every dealership must cover another 10% to 15% in overhead just to break even, then needs to make a profit to get a return on its multi-million dollar investment. Anyone with a modicum of fundamental business sense would understand that. (Non-profit Consumer Reports apparently doesn’t. It claims on its website that it’s revealing “the dealer’s true cost.” Ugh!)
WHY IS NO OTHER AUTO-INFO SOURCE TELLING YOU THIS?
Because it would dry up their revenue stream from the auto industry and kill their business. Fighting Chance is the one auto-info information source whose only allegiance is to consumers like you.
If any of my so-called “competitors” — including Consumer Reports — would like to debate these subjects and watch me expose the cold, hard facts they’re hiding in a national media venue, I can probably arrange it. It's a juicy story CNN would probably love because it impacts 12 to 13 million American families every year. That debate would destroy their credibility with new-car shoppers overnight. Stealing Jack Nicholson's line, I'd say to them, "You can't handle the truth!"
DO THE BIG AUTO-PRICING PLAYERS KNOW THE TRUTH?
Yes, many do. On November 27, 2012, I passed out the 47-vehicle exhibit referenced above to senior executives of Consumer Reports, Kelley Blue Book, Edmunds, TrueCar and Cars.com in a USA TODAY automotive roundtable discussion on "whether online car shopping and information services are believable and are relevant in today's market." (It was little David vs. 5 industry-information Goliaths.)
You could have heard a pin drop in that room for several minutes. Clearly, it was the first time they'd seen those numbers, although they’d been right under their noses for over 18 years! No one disputed them. No one said, "That's old news. We've known that for years." I was shocked that a 78 year old man (me), essentially working alone, knew more than they did about the most important data in their business, especially since they’d been the consumer’s key source of new-vehicle pricing for so many years.
The Editor-In-Chief of Cars.com said, "It tells me that (automakers) and dealers responded to the publishing of invoice pricing online and said, 'We need to find another way to mask what (dealers) are being paid so that people don't feel like they're getting screwed.” No one disagreed.
The Exec VP of TrueCar acknowledged that because of these hidden incentive programs, there are times when a dealer might sell a car for thousands less that he’d normally charge in order to reach specific bonus targets. No one disagreed.
The President of Auto Trader.com, owner Kelley Blue book, looked at me and said, “Overwhelmingly, our research shows that consumers ultimately don’t want the best price. Consumers just want a fair price." He added that ‘a fair price’ “means that when I tell my neighbor what I paid for the car, I won’t be embarrassed.” And TrueCar’s Executive VP said, “We have data to support exactly what he said.” No one disagreed. (Is that how you feel when you buy or lease a new car?)
Edmunds’ Director of Pricing and Industry Analysis said the invoice, however true or false, is another data point, and "every piece of data you have out there is helpful and can be critical" as a shopping tool. No one disagreed.
" Click here to read the full USA TODAY "Don't Trust That Invoice Price" expose´, in which I was dubbed a “peppery contrarian.”.
They all left the meeting with that exhibit in hand, but it’s been well over a year, and not one of them has breathed a word of the truth to consumers. Not even Consumer Reports. I asked the CR representative for the name of the person running their New Car Price Service, so that I could enlighten him or her. He gave me a nasty look and just left. (When the truth gets around, folks will figure out that the product CR has been selling for decades has been built on a house of cards.)
Here’s my take on what they were really saying:
“If you want the lowest available price on the second most expensive purchase you make, don’t expect to get it by using our service. We get all our revenue from auto companies and their dealers. If we told you the whole truth and how to best use it to save the most money, we’d be out of business.”
In net, little David was the only true consumer advocate at that table.