TrueCar Exploring Used-Car Market Options

Fresh off IPO, company developing new service.

by on May.19, 2014

John Krafcik, TrueCar's new president, said the company is working on new service to buy and sell used cars.

With the money from its initial public offering of stock in the bank, TrueCar plans to move quickly to use its resources to expand its reach.

John Krafcik, TrueCar’s new president, said one of the areas in which it will be putting a substantial effort is a new service that would make it easier to sell used vehicles.

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“We’re not a shopping site; we’re a buying (site),” noted Krafcik. “Once you’ve made the decision you want to buy a Sonata, we help you find it at a competitive price.”

TrueCar help buyers eliminate the pain or anxiety that comes with purchasing a new vehicle by helping them understand the prices of new vehicles; helping obtain firm quotes from multiple dealers and eliminating the need for negotiation or haggling, he added.

In return, TrueCar’s 8,000 dealer partners get what amounts to a firm order from a motivated customer, Krafcik said.

“Most purchases, however, also involve the disposition of a used car,” Krafcik said. “That can be a whole other source of pain,” he noted.

But TrueCar is developing a service that will make it easier for disposing of a used car, particularly late-model used cars, by applying its expertise and data to the used-vehicle market.

Instead of posting the car on CraigsList or some other website, TrueCar would have customers upload 10 photographs and answer 20 questions about their vehicle. TrueCar, using the data accumulated by ALG, the automotive lease guide, which is used to set the residual value of leased vehicles, can tell you what you might expect and solicit bids from interested dealer.

“The buy side wants more late-model used cars,” Krafcik noted. This will be a new way to deliver them and it help shorten buying cycles by giving more buyers confidence they will be getting a fair value for a used vehicle when they trade it.

“We’re in deep development right now,” Krafcik said. “We want to vet it the right ways. We’re building a bridge with better analytics,” he said.

Larry Dominique, president of TrueCar’s ALG subsidiary, said ALG has developed comprehensive data about residual values. The data is very deep and builds on itself to create a very detailed picture of prices of all kinds of used vehicles.  “We know we have accurate data,” which inspires the confidence of both buyers and sales, Dominique added.

“When we’re forecasting values we can give you the ebb and flow,” making it easier to offer dependable forecasts about specific trends.

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Right now the demand for vehicles is very steady. “May is always a good month. We see the momentum continuing,” said Dominique, adding sales should top 16 million units this year we’re and could grow to 16.4 million to 16.5 million units.

Both Krafcik and Dominique said the successful launch of the IPO gave TrueCar a boost, but “there were some choppy waters,” noted Krafcik.

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The faltering performance of various internet stocks forced TrueCar to reduce its offering price to $9 per share rather than the expected  $12 to $14 per share detailed in the company’s original prospectus. However, the TrueCar’s shares gained more than 11% in value on the first day of trading, Dominique said.

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“We launched in the green,” noted Krafcik. “It was very exciting. We’ve been a private company but we’re all about transparency so it makes sense to be a public company.”

TrueCar expects to publish its first financial report about six weeks after the close of the second quarter or roughly mid-August.

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