Auto insurance costs too much! Learn why here READ MORE
Car Buying Services - Do They Really Save Money
No doubt you've seen the ads at banks, credit unions, car towing services, at work, or even on consumer web sites: "You'll get guaranteed, no-haggle price quotes from dealers in your area… free, anonymous, and with no obligation." Sometimes the language promises even more: " *** car buying services make it easy to get the best deal on a new or used car. Average new car savings of $4,154." And even bolder, "Save money when you need it most! Buyers have already saved millions of dollars!"
Most consumers know that nothing is really free, you just have to look harder to find out how you're paying for it. Most people smile wryly at promises as simple as "Free Car Wash With $15 purchase!" We know that something costing $15 isn't free, no matter what the ad says. So what's up with car buying services?
How Car Buying Services Really Work
Autobytel, TrueCar, and other buying services that TrueCar powers, are moving into Florida. They promise to save you money. But the truth is, these automotive buying services are not free. What consumers do not know is that they charge dealers a fee for every transaction, which is passed onto you, the consumer.
The Florida Consumer Action Network has filed a complaint with the Federal Trade Commission, demanding an investigation of the practice of “free” car buying services. Automotive News1 reported that an auto dealer pays Autobytel $295 for every lead that results in the sale of a new vehicle. Automotive News2 also reported in January that dealers pay TrueCar $299 for a new vehicle sale and $399 for a used vehicle sale. TrueCar does not disclose these fees. This process is not transparent to consumers.
How Can Consumers Get Car Pricing Information
The Internet already offers consumers valuable, factual pricing data. Even some dealers, such as Jack Fitzgerald in our area, offer pricing on the Internet that is as low, if not lower, than TrueCar. According to Edmunds data, in 2011 the average consumer already saves 12.1% off MSRP when buying a vehicle. TrueCar stated in a Fortune Magazine3 interview that their buyers saved 9.7% off MSRP in 2011.
Consumers can do better shopping on their own than using these car buying services. Here are a few things to consider when shopping for a vehicle:
Compare prices on dealer websites.
Do not give your name and contact information to anyone except the dealers you want to shop. This will ensure that any buying service fees are not passed onto you when you purchase a car. Automobile dealers pay for every customer that comes from these auto buying services and consumers ultimately pay these costs.
FCAN Is Taking Action
FCAN is demanding more transparency from car buying services. They should disclose to consumers how much the dealer is paying for the referral. That allows consumers to make informed decisions.
1 Automotive News, February 20, 2012. Autobytel boosts pay-per-sale leads. By David Barkholz
2.Automotive News, January 16, 2012. Bowing to states, TrueCar alters models. By Ryan Beene
3. Fortune Magazine, December 26, 2011. Car Shopping: A Better Way? By David A. Kaplan