TrueCar Inc. this month dropped Honda of Annapolis (Md.) from its network of participating dealerships after the store failed to finance enough vehicle sales through USAA, a TrueCar partner.
USAA is a financial and insurance services firm for active and retired military personnel and their families. Members access TrueCar quotes through a TrueCar vehicle-buying button on USAA's Web site.
And for Honda of Annapolis, near the U.S. Naval Academy and several other military installations, the connection is important: About half of the dealership's customers are USAA members, said Sales Manager Andre Pilajevs.
TrueCar CEO Scott Painter said Honda of Annapolis violated its TrueCar contract by financing with American Honda Finance Corp. a high proportion of car buyers who came to the store through the USAA portal.
Under a contract between TrueCar and the store, USAA members who are pre-approved for car loans with USAA are not even supposed to be presented with competing financing offers.
TrueCar wants 46 percent of USAA members who buy a vehicle at Honda of Annapolis with a USAA loan approval to finance through USAA, Pilajevs said. But the store was financing less than 20 percent of those customers through USAA, he said.
That TrueCar bounced a dealership from its network reflects the revitalization of the company. Early last year, TrueCar was struggling to hold its dealer network together. (See story below.)
TrueCar is an online shopping site that links car buyers with dealerships willing to offer them guaranteed prices on vehicles. Honda of Annapolis sells 100 to 120 new vehicles per month.
TrueCar's partners, whether USAA or Capital One, want an opportunity for auto loans and TrueCar intends to honor those pledges, Painter said. USAA owns just over 17 percent of TrueCar and is among its largest sales partners.
Pilajevs said Honda of Annapolis got sideways with TrueCar by presenting the best deal for consumers whether from American Honda Finance, the Honda captive, or USAA.
"What TrueCar is asking us to do is tell the consumer that they must pay higher rates," he said.
Painter said TrueCar typically warns dealers that they are out of compliance on their contracts before dropping them. The Honda captive also offers $500 for active military personnel.
Pilajevs showed e-mails to Automotive News of such notifications from TrueCar.
Said Painter: "They usually get three strikes."