• Stop being a LURKER - join our dealer community and get involved. Sign up and start a conversation.

OPINION: CARFAX is extorting my dealership

yagoparamo

Sr. Refresher
Dec 30, 2009
1,901
493
113
First Name
Yago
This is a reprint of an article published at Driving Sales by Jeremy Alicandri.

You can see the original here: http://www.drivingsales.com/blogs/jeremy/2012/10/03/opinion-carfax-is-extorting-my-dealership?utm_source=DrivingSales&utm_campaign=1201435f8e-Dealer_Alert_A_10_410_3_2012&utm_medium=email

I thought it could bring interesting changes to Carfax/Autocheck users and very interesting to share.




Last month, after an extensive comparison of nearly 6,000 VINs, BMW of North America concluded that AutoCheck’s Vehicle History Reports were just as reliable as CARFAX reports. Finally, after years of only supporting CARFAX, BMW’s mandate for Dealers to use CarFax for Certified BMWs was over. This meant, that as a BMW Dealer, I could now choose either CarFax or Experian’s Service (AutoCheck) as my vehicle history report provider.


So why would I want to change?



The answer is simple. Last month, I paid CARFAX $2,575.49 to provide unlimited Vehicle History Reports for my dealership. In comparison, as part of a discount agreement with BMW, AutoCheck offers their version of the same service for $1098/month – a savings of over 50% per month - and at a price that was guaranteed for at least 1 year. Suffice it to say, I was delighted by the potential savings!


So, I immediately contacted my CARFAX rep with an ultimatum – I demanded that CARFAX either price their services more competitively or consider my contract cancelled. The response I received was unconscionable - my CARFAX rep explained that the monthly price would NOT be lowered and if I chose to leave CARFAX, then my ability to compete effectively on Cars.com and AutoTrader.com would be severely impaired.


How is this possible?



Evidently, CARFAX pays AutoTrader.com and Cars.com a huge stipend to be the “sole” provider of vehicle history reports on these two marketplaces. Apparently, as part of this agreement, AutoTrader.com/Cars.com cannot display AutoCheck Reports(even if AutoCheck is the provider at the dealer’s store), but they can display CARFAX reports for CARFAX participating dealers. As my CARFAX rep explained, with the vast amount of competitor’s inventory on AutoTrader.com/Cars.com, my decision to not show a vehicle history report (when my competitors are in fact showing these reports), would indicate to consumers that my dealership had “something to hide” and push customers away from my listings. I understand transparency and I knew she was right - I was livid.


It is my opinion, that CARFAX is using Cars.com/AutoTrader.com as means to extort dealers into paying higher fees for CARFAX’s services – all while Cars.com and AutoTrader.com receive a handsome tariff. Does this sound like an unfair, anti-competitive, or potentially illegal trade practice? I thought so.


This week, I spoke with Alex Vetter(VP of Cars.com) and Jeff Catron(Director of Dealer Strategy at AutoTrader.com). I explained to both executives, that is my opinion, that I’m currently being extorted by CARFAX. I explained that unless a fair resolution is offered, I intend to file a complaint with the FTC against all parties. They both listened to my feedback, and they said they’ll consider it closely, but they would not provide a definite decision. (Note: In my past experiences with Alex Vetter, he has always been fair and equitable in his dealings – I’m optimistic that Cars.com will protect the interests of the franchised dealer).


Why is this a big deal? Can’t you sell your inventory elsewhere?



Still today, I have a very favorable opinion of Cars.com, I receive plenty of business from the site each month. And while my opinion of AutoTrader.com is not favorable and regularly worsening(thanks to my opinion of their pre-IPO cash out), I can’t ignore that AutoTrader does in fact generate business for my dealership and still remains an online behemoth. At least as it applies to my dealership, leaving both of these sites would severely harm my effectivness in selling pre-owned cars. Moreover, as I explained earlier, in today’s transparent and instant information environment, the used car shopper will ignore dealers that cannot quickly and easily provide history reports substantiating the condition of their vehicles - especially when other dealers do. And in fact, according to our CARFAX rep, from January 2012 to August 2012 my dealership has received 17,466 ICR’s - or as she explained, the reports ran by consumers viewing inventory on AutoTrader.com and Cars.com. (Note: I asked for a specific breakdown, and CARFAX has not supplied this data. In addition, for comparison purposes, I sold about 700 used vehicles during this same period).


The exact magnitude of this problem is far reaching. There are nearly 18,000 franchised dealers in the US that may be in a similar or even worse situation. I feel that dealers should not be forced to pay an unfair premium to CARFAX in order to market their vehicles and compete online. Moreover, Cars.com and AutoTrader.com should align their business model with the interests of their most valuable customers - the dealers. We paid the monthly fees that allowed Cars.com and AutoTrader.com to flourish – we should not be penalized as a result.


Disclaimers:

• Opinions AND VIEWS SET FORTH HEREIN are my own AND DO NOT REPRESENTS FACTS. SUCH OPINIONS AND VIEWS COULD BE WRONG. They do not represent the companies named or cited in this blog.
• I am not a lawyer. This information, especially legal advice, can be completely incorrect. No warranties are provided or expressed. Any reliance on such information is solely at your own risk.
• I am not privy to ANY details of the backend operations/analytics of any site mentioned in this blog
• This blog does not provide financial advice, and should not be interpreted as such.
• All trademarks are properties of their respective owners.
 

ddavis

Sr. Refresher
Jun 28, 2011
1,493
491
113
First Name
Doug
That fox needs to be wearing a mask. $2600 for CarFax is outrageous. Didn't Uncle Joe switch to AutoCheck without any effects on volume?
 

ajholland

Refresher
Nov 29, 2009
172
12
18
First Name
Aaron
That fox needs to be wearing a mask. $2600 for CarFax is outrageous. Didn't Uncle Joe switch to AutoCheck without any effects on volume?

We received a notice about 6 months ago that all 6 of our stores were going to receive an increase on the next invoice. I understand rate increases from vendors, but to get notified by a small sentence on an invoice and not from an in person visit was not professional. Along with the fact we thought it was already overpriced, we decided to look into Autocheck. We did make the switch and 5 months later I haven't seen any negative effects on our lead volume or closing %. Our customers don't seem to mind whether it's an Autocheck or Carfax report. I believe we have had 1 customer in 5 months between 6 stores ask for a Carfax instead of the Autocheck. Well worth the switch in our opinion.
 

jssimonton

Getting Refreshed
Mar 9, 2011
39
16
8
First Name
Jeff
I recommended the change from Carfax to AutoCheck at my previous dealer group and we currently use AutoCheck at our dealership. The issue has never been customer interest in a Carfax; when handed an AutoCheck report, customers are fine. The real issue is that because Carfax has an exclusive program with AutoTrader and Cars.com, our inventory has the "Get a Carfax Record Check" link instead of the snappy logo and "View the free Carfax report". As a result, and as the Carfax rep points out, online shoppers may think there's something to hide.

That AutoTrader and Cars.com have sold the exclusive right to extort money from dealers is true evil. That the best sales position Carfax can take is that they are the only choice is sad. My experience is that people that use both AutoCheck and Carfax actually prefer AutoCheck. For consumers, of course, that's not so much an option on AutoTrader or Cars.com.
 

ddavis

Sr. Refresher
Jun 28, 2011
1,493
491
113
First Name
Doug
We received a notice about 6 months ago that all 6 of our stores were going to receive an increase on the next invoice. I understand rate increases from vendors, but to get notified by a small sentence on an invoice and not from an in person visit was not professional. Along with the fact we thought it was already overpriced, we decided to look into Autocheck. We did make the switch and 5 months later I haven't seen any negative effects on our lead volume or closing %. Our customers don't seem to mind whether it's an Autocheck or Carfax report. I believe we have had 1 customer in 5 months between 6 stores ask for a Carfax instead of the Autocheck. Well worth the switch in our opinion.
Aaron, they might have opened a Netflix type situation. I'm sure there are a lot of people that appreciate your input.

Many of the auctions use AutoCheck. I'm sure that I am not the only person that has sent a car to auction with a clean CarFax to find out that AutoCheck showed an accident.

If you have a customer that insists on a CarFax, "pending a clean CarFax report, is there any other reason you wouldn't buy my car, today? Just go to CarFax, like a consumer, and buy one.
 

ddavis

Sr. Refresher
Jun 28, 2011
1,493
491
113
First Name
Doug
I recommended the change from Carfax to AutoCheck at my previous dealer group and we currently use AutoCheck at our dealership. The issue has never been customer interest in a Carfax; when handed an AutoCheck report, customers are fine. The real issue is that because Carfax has an exclusive program with AutoTrader and Cars.com, our inventory has the "Get a Carfax Record Check" link instead of the snappy logo and "View the free Carfax report". As a result, and as the Carfax rep points out, online shoppers may think there's something to hide.

That AutoTrader and Cars.com have sold the exclusive right to extort money from dealers is true evil. That the best sales position Carfax can take is that they are the only choice is sad. My experience is that people that use both AutoCheck and Carfax actually prefer AutoCheck. For consumers, of course, that's not so much an option on AutoTrader or Cars.com.
There is nothing to limit you in adding it to the description plus adding a picture file with the AutoCheck logo.

If I used AutoCheck, I would have this blown up for my customers: check here.
 

Jerry Thibeau

Sr. Refresher
Apr 28, 2009
1,164
348
113
First Name
Jerry
I say dealers need to add a line item to the buyers oder on every used car sold.

CarFax Report $49.95

Pass it on to the consumer.
 
Reactions: 1 person

yagoparamo

Sr. Refresher
Dec 30, 2009
1,901
493
113
First Name
Yago
I say dealers need to add a line item to the buyers oder on every used car sold.

CarFax Report $49.95

Pass it on to the consumer.
Not advocating Carfax but keeping the conversation so;

Isn't that supposed to be included in the pack?

Jokes apart, Carfax has brought credibility to the car biz and took certain liabilities from the dealer both when taking trades in and also in case they took a bad car and didn't know it at least they can claim it passed the Carfax.

So what is the gripe here?

Autocheck can do this for less than Carfax so we feel cheated.

Te solution is: Can dealers present Autocheck to customers and will the customers take in place of Carfax?

It seems by the answers that it can, the more feedback about this the better for those dealers trying to make a move.
 

kevinfrye

Sr. Refresher
Apr 7, 2009
250
164
45
First Name
Kevin
I certainly believe that CarFax is better branded and has much greater awareness with consumers - however we did not have problems when we used AutoCheck, outside of the AutoTrader/Cars.com issue. Perhaps the question is whether the brand value of CarFax is worth the significant premium you pay for it...
 

ddavis

Sr. Refresher
Jun 28, 2011
1,493
491
113
First Name
Doug
Perhaps the question is whether the brand value of CarFax is worth the significant premium you pay for it...
That is the bottom line. Anyone that doesn't believe you are being held up, CarFax is charging more than I paid for Cars.com.