TrueCar to drop 75 franchisees in policy disputes

Krafcik: Trying to improve transparency.
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TrueCar Inc. this month plans to drop up to 75 of its 8,000 participating franchisees for failing to honor price guarantees made to car buyers or for other violations of TrueCar policies, President John Krafcik said today.

TrueCar also will launch a new app in the coming days that allows consumers to take photos of their trade-in vehicles and seek a price for the vehicles from competing dealers in the TrueCar network, Krafcik said.

TrueCar has applied to Apple for the app to be available at the Apple app store, he said.

Krafcik said both developments are aimed at improving the transparency and ease of buying a vehicle.

TrueCar, which raised $70 million during an initial public offering last month, is a car-buying site that has developed a network of dealers to offer guaranteed prices to shoppers. In most states, dealers pay TrueCar $299 for every new car and $399 for every used car sold via the site.

TrueCar generates about half its car buyers from USAA and other large companies and organizations that offer the TrueCar buying service to their members as a perk.

Infractions

Krafcik said TrueCar has been adding dealerships over the past several months at a fast pace. Now it’s time to cull some of those that aren’t offering a top buying experience, he said.

Infractions include failing to provide the price guaranteed a customer through the TrueCar site, he said. TrueCar Executive Vice President Larry Dominique said those being dropped typically received at least “two strikes,” or warnings, before being dropped.

In early 2012, TrueCar had a hard time keeping dealers in its network. The company nearly folded after regulators in multiple states accused it of violating a variety of advertising and brokering laws.

By mid-2012, TrueCar dealer network had fallen from nearly 5,800 to 3,200 franchises.

But TrueCar changed its operating methods to come into compliance in all states in 2012. The biggest change for dealers was replacing a system in which dealers could see in real-time the prices that rivals were bidding for business for one that features blind bidding.

The old system tended to drive down transaction prices and profits.

Krafcik said he expects TrueCar’s dealership network to grow to about 10,000 or 11,000 franchises to provide comprehensive coverage nationwide for shoppers looking to buy a vehicle through TrueCar.

You can reach David Barkholz at dbarkholz@crain.com. -- Follow David on Twitter and


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