Editor's note: A story and headline on an earlier version of this story -- which also appeared on Page 3 of the Dec. 12 print issue -- incorrectly reported that Honda singled out TrueCar.com when the automaker warned dealers that they would put their local marketing payments from Honda at risk if they offered prices below invoice on Internet shopping sites.
Honda, leery of brand-eroding discounts, has warned its dealers to stop offering prices below invoice on Internet shopping sites.
The discounts jeopardize payments that Honda sends to dealers for local marketing, the automaker told dealers. Industrywide, the payments range from $300 to $600 for a $30,000 vehicle, one dealer said.
TrueCar is a leading player in the growing online retail industry that channels Internet leads to dealers. TrueCar CEO Scott Painter last week criticized Honda's position.
"They're trying to say Hondas are worth more than invoice, but if everybody's paying less than invoice, that's not true," Painter said.
The dispute highlights frustration among some dealers and automakers who say third-party Web sites such as TrueCar are eroding their power to set transaction prices.
TrueCar publishes recent transaction prices on its Web site and offers what it calls guaranteed low prices to shoppers. Dealers who sign up with TrueCar agree to pay the company $299 for each new vehicle sold from a TrueCar lead and $399 for each used vehicle sold.
Honda spokesman Chris Martin said that the automaker considers online shopping sites as advertising media. And Honda does not permit dealers to advertise prices below invoice, in part because it erodes Honda's brand equity. Dealers who do so jeopardize per-car payments from the factory under Honda's dealer marketing allowance.
But Painter said Honda is ignoring the realities of the marketplace, in which dealers compete aggressively on price.
In response to Honda's actions, TrueCar last week began warning Honda shoppers with a banner on its Web site that they might not get TrueCar's low price.
Upfront price guarantees are a key part of TrueCar's pitch to shoppers. And the prices listed for vehicles on TrueCar's Web site often are below invoice.
For example, a TrueCar search near Ann Arbor, Mich., for a 2012 Toyota Camry SE with automatic transmission and four-cylinder engine returned three guaranteed prices from local dealers, two of which were for less than the car's $22,075 invoice price. One dealer was offering the car for $21,875, another for $21,025 and a third dealer listed a car at the invoice price.
In TrueCar's terminology, the invoice is several hundred dollars above the cost of the vehicle to the dealer because the price does not include such factory payments to dealers as the holdback allowance.
Painter said the 278 Honda dealers under contract with TrueCar sold 2,389 vehicles in November. TrueCar's Honda dealers sell an average 8.6 new Hondas per store per month, and leads from the Web site generate 12.2 percent of the total sales volume of TrueCar's Honda dealers, he said.
"They could be doing twice as many sales through our platform than they are right now," if Honda revoked this policy, Painter said.
Painter was careful to add, though, that he was not picking a fight with Honda.