Buying a car is a minefield of potential mistakes — and anxiety over making them.
TrueCar has raised $30 million to make the process a little less stressful. The company claims to have “changed car buying forever” with its site that generates price estimates for buyers, so they go into the dealer knowing how much to pay.
TrueCar analyzes factory invoice prices, average price paid, and the manufacturer’s suggested retail price (MSRP) to create a TrueCar price estimate. Buyers can then take a “guaranteed savings certificate” into a TrueCar certified dealer so they don’t have to deal with negotiations and pressure-infused sales tactics.
The company said its members save an average of $3,046 off the MSRP when they buy from a participating dealer. It currently works with 7,000 new car franchises and independent dealers across the country and has facilitated 1 million sales since it was founded in 2005. Nearly 400,000 of those sales happened this year.
Americans are expected to buy approximately 15.6 million cars this year, with spending topping $370 billion. TrueCar said last month, its users accounted for 2.3 percent of all new car sales in the U.S. and that it has saved its members about $2 billion.
CEO Scott Painter is a serial entrepreneur who has founded 37 companies. He previously served as CEO of CarsDirect.com, which was founded in 1998. TrueCar raised $200 million in debt and equity financing in 2011 to expand its offerings, build out the data analytics tech, and fund acquisitions.
However, the company hit some roadblocks after an aggressive marketing campaign that proclaimed its ability to get customers the absolute lowest prices. This move was not exactly well received by auto dealers. One-third of its dealer network left, and TrueCar’s sales tanked.
Painter realized he would have to change tactics if he wanted TrueCar to survive.
Now instead of promoting the lowest price, TrueCar shows a “fair price,” and dealers pay $299 for every customer lead that results in a sale.
Vulcan Capital, billionaire and Microsoft co-founder Paul Allen’s firm, led this round. TrueCar is based in Santa Monica, Calif.
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