We live in an awesome age. I can easily pop open the amazon app on my phone and buy just about any product from numerous, competing sellers. I get instant access to descriptions, reviews, company ratings, and great, competition-driven (market) prices.
Wouldn’t it be great to be able to do the same when new-car shopping?
I think many of us feel this way. Just look at the proliferation of new-car buying apps—TrueCar, Kelly Blue Book, Edmunds.com, and Cars.com—to name some of the more popular ones. These companies certainly believe we’re interested. The apps provide on-the-go access to reviews, pictures, videos, some pricing information, and often, a price quote service.
The Down Side
Unfortunately, as of today, it’s simply not possible to use a mobile app to access a truly competitive new-car marketplace. Each app tends to be curated with one thing in mind—to connect you, through the app, to a specific subset of dealers and inventory.
Here’s the thing: The vast majority of new cars are commodities—they’re mass produced and available from every franchise dealer. Anything that limits that universe, limits competition and boosts prices. The result is higher than market price quotes in addition to the cost of a middleman (whether you or the dealer pays the app developer).
The down side doesn’t end with the lack of competitive pricing.
TrueCar’s app, for example, “collects an unprecedented amount of information on customers” according to an article published last year by Automotive News. In a speech to car dealers and automakers, TrueCar founder and past CEO Scott Painter said, “TrueCar enables you to hypertarget your individual consumer, customizing incentives for each of them, based on their individual needs, affiliations, financing, even the cars in their garage.”
“TrueCar enables you to hypertarget your individual consumer, customizing incentives for each of them, based on their individual needs, affiliations, financing, even the cars in their garage.” –Scott Painter, TrueCar Founder
Now, I don’t know how you feel about passing out your personal data, but that statement certainly gives me pause. Ironically, the TrueCar app doesn’t request any access upon download or when used to conduct research. Evidently, the data collection kicks in when you open an account (required to request quotes).
Additionally, Painter’s statement seems to indicate that some incentives would only be available through the app if needed to make the sale. (Confirmed by later statements.) However, it seems to me that we all prefer the best possible price—including all the available incentives—whether we “need” it or not.
The Reason Car-Buying Apps Fall Short
So, why isn’t there any online (website or app-based) competitive marketplace for new cars? It’s because franchise dealers simply refuse to participate in any endeavor that doesn’t put acceptable limits on competition. A case in point: TrueCar’s experience in 2012. In a nutshell, TrueCar nearly went bankrupt when half of their dealers stopped participating. Recovery began only after TrueCar made numerous concessions to dealers at the expense of consumers.
What’s A Consumer to Do?
Car-buying apps can be useful if you prefer to do your research on a mobile device. They tend to be more user friendly than the equivalent mobile website. However, the apps often provide a more limited set of information when compared to the website versions. Depending on your objectives, the apps may be more than sufficient for gathering the information you need.
When it comes to actually buying the car, the apps definitely fall short (just like the website versions). There is no way to directly buy a new car from an online market place using an app. Additionally, the price quotes come from a system that purposely mutes the effects of robust competition. And of course, using a middleman always adds an incremental cost.
The best way to get the best (market) price on a new car (no matter how you do your research), is to get multiple dealers competing for your purchase. You can even do it from your mobile device with a little finesse. I recognize that competition typically equates to haggling (something that few enjoy), but I believe a non-negotiable approach is actually more effective. You gain the benefits of robust competition without the typical back and forth hassle. If you’re interested in learning more about this approach, take a look at a free preview of my new eBook—Negotiation-Free New Car Buying: Simply Save More and Stress Less.
Have you ever used a car-buying app to get a price quote? How was your experience? Do you have a favorite app for researching new cars? Comment below and let us know!
Until next time, happy shopping!