TrueCar: The Latest Piece of the Zag Pie

I’d like to find a fair price for this Z, please.

I read about Santa Monica-based TrueCar in today’s Wall Street Journal. TrueCar, which generates detailed price reports for carbuyers, launched late last month. As most media outlets and blogs have verified, TrueCar is a useful addition to the world of car buying. But will it work as a business? I decided to take a closer look at the company to see if I could find out.


Timing is Everything
TrueCar’s launch came at a good time. Although few people are buying new cars, everyone is looking for a bargain. And bargain-hunting websites are taking off, fueled by the media. Just look at this WSJ excerpt. It’s enough to give a broke consumer hope:

Many dealers have unusually high inventories they want to sell in a hurry, so buyers willing to research price trends, visit numerous dealers and negotiate assertively can pick up a set of wheels at discounts unheard of just a few months ago.

Overall, the average transaction price for passenger vehicles has fallen 2.9% in the past six months, to $27,941, while the average cash-back incentive rose 2.3% in April from a year earlier, to $2,628, according to market research firm J.D. Power & Associates.

The article says that according to TrueCar, dealers were selling 25% of their 2009 vehicles below cost in March of this year.


What does TrueCar do?
The service gives you a custom price report on your desired car. You choose your region, car, and features, and TrueCar determines a good price based on recent car sales in your market. You can then print your report and use it to negotiate with your dealer.

Features on the report include a good price, great price, average price paid, and average dealer cost for your car of choice. You can also see how prices on your car have been trending for the past 6 months or so. Graphs, easy-to-understand numbers, and a useful layout make the reports a helpful tool for car buyers. For a complete review, see this TechCrunch article.

According to the WSJ article,

(CEO Scott Painter says that) TrueCar hopes send car salesmen “the way of the travel agent.” Painter…says the slump in sales has resulted in discounts so steep that new cars can sometimes be less expensive than comparable used ones.

What Makes TrueCar Better?
TrueCar undoubtedly has a useful product, but why not use or Kelly Blue Book to figure out a good price? According to TrueCar’s FAQ,

TrueCar is sharing the actual data itself, not opinions about what the price should be. We don’t have an opinion about price, we just show the truth. Others give statistical opinions of what is a fair price based on data, but they don’t expose the data itself. TrueCar also gives context to the numbers for the first time, by sharing the full range of prices people have actually paid.

Sounds good, but what makes the data itself special? I once again referred to the FAQ:

TrueCar aggregates data from dozens of sources – many of them proprietary and exclusive to TrueCar – and all highly confidential. TrueCar’s pricing data is currently calculated using roughly a quarter of all individual U.S. retail transactions per month. The company expects to expand that to close to half of all U.S. retail transactions by the end of the year.

How did TrueCar get its hands on exclusive, proprietary information? How much does that information cost the company, which is currently VC-funded? Are the number of sources along what make the data qualitatively superior to competitors, or is there more to it?

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How Will TrueCar Make Money?
On first glance, it looked like TrueCar was following the old shaky dot-com model: Find advertisers, sell as-yet-undefined “special products.” From the FAQ:

TrueCar has nothing to sell and is not serving as an “infomediary.” Since we’re not in the business of connecting consumers with dealers, we have no hidden agenda and nothing holding us back from providing accurate data.

Our mission is to first make a positive leap forward for consumers and dealers. Down the road we have plans for advertising, and to develop a suite of specialty price distribution products.

So they’re not selling anything, they’re not in any kind of business, yet they’re providing a service. The TrueCar business model looked suspect on its own–are undefined monetization plans even viable anymore?–until I realized that it’s just a slice of a much bigger plan.


Secret to Success: The Leadership
TrueCar’s business model is unproven, and its proprietary data is opaque, but its leadership brings the entire company into context. CEO and serial entrepreneur Scott Painter founded Zag,, and He played a big role in bringing car shopping online, and, according to this bio, was the first person to introduce upfront car pricing on the Internet. Zag, which he launched in 2005, eventually plans to launch the auto industry’s first fully online transaction, which would include car pricing, purchase, insurance, and financing. is basically a piece of the Zag pie. Zag is positioning itself to serve the car industry, consumers, and advertisers. Painter’s choice to release TrueCar as a quasi-independent product is smart. Through TrueCar, he could gain consumer loyalty for his products and, as a result, increased dealer interest in Zag.

One of the main ideas behind Zag is to give consumers a fair price while increasing volume for dealers. TrueCar smoothly puts the consumer component in place. Will dealerships follow? Time will tell.

One thing is for certain: TrueCar is part of something bigger.

Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.