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TrueCar CEO explains why his company isn't the next Carvana or Vroom

·Senior Reporter
·3-min read
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Don’t call TrueCar (TRUE) the next Carvana (CVNA), or Vroom (VRM).

The car-buying service is an online platform linking car buyers to dealers, using its database of pricing information to give both parties an accurate, fair price of cars on the platform. Buyers and dealers can use an offer the system creates, or come to their own during the negotiation process.

TrueCar says 60% of its users want to complete the full car buying process online. That’s where a new pilot program in Florida called TrueCar+ comes into play.

“There's been a trend for more and more of the shopping experience to move online and with TrueCar+, we're bringing the entire experience and the ability to buy the vehicle,” TrueCar CEO Mike Darrows said in an interview with Yahoo Finance. “[Consumers] can start their research on our site, find a vehicle that meets their needs, they can actually calculate a real monthly payment, either a loan or a lease, get a cash value for their trade-in, actually apply for financing directly online and then sign a buyer's order on our platform.”

A TrueCar certified dealer
A TrueCar certified dealer

What TrueCar does not do, however, is acquire cars to sell directly to its users - that’s what the 13,000 car dealers on its network are there to do. TrueCar calls its model “asset light” versus those competitors, but that doesn’t mean the company isn’t trying to amp up its services.

“We sit right in the middle of supply and demand, we want to be the technology and the platform, the marketplace, if you will, that connects consumers with our retail partners and enables that transaction to happen,” Darrow says. “We'll continue to advance it from a digital perspective and allow consumers to do more and more of that from the comfort of their home.”

Drilling down into what consumers are currently buying, as fuel costs have skyrocketed, consumer interest and purchasing of electric vehicles (EV) has risen concurrently. Recent data from Experian has been bearing that that out, with EV registrations jumping 60% in the first quarter this year compared to a year ago.

A new Tesla Model 3 is shown at a delivery center on the last day of the company's third quarter, in San Diego, California, September 30, 2019. REUTERS/Mike Blake
A new Tesla Model 3 is shown at a delivery center on the last day of the company's third quarter, in San Diego, California, September 30, 2019. REUTERS/Mike Blake

According to Darrow, another factor fueling the rise is an actual jump in EV supply.

“We are starting to see the original set of EVs that were sold new, come back to the market,” he says. “So I think as gas prices stay up, as more and more EVs come back as used cars, they'll be viable alternatives on the used car market.”

As for the company itself, TrueCar has avoided the recent pitfalls of Carvana and Vroom due to its asset-light business model, and fiscal prudence. But operating in a highly discretionary market like auto sector means the company isn’t immune from economic and market forces.

TrueCar stock is down 8% year-to-date, though it is easily outpacing the performance of its competitors Carvana and Vroom, and even the S&P 500 (^GSPC), which at the time of this writing is down 17%.

“We're certainly feeling some of the pressure of what's going on in the marketplace,” Darrow says when discussing the company’s stock performance. “We're fortunate in that we've got a really strong balance sheet, we've got a lot of cash on hand and no debt, so we're trying to stay focused on what we want to accomplish.”

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Pras Subramanian is a senior autos reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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