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OPINION: CARFAX is extorting my dealership...

CARFAX provides stickers to place on our pre-owned vehicles. This is a shot of a sticker attached to a key cabinet in our office. We do not place these stickers on our cars, as we feel the image of the CARFOX is not consistent with BMW’s brand values.

Originally published on October 3, 2012.

 

 

Please click here for my most current CARFAX post.

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.

Comments

Jeremy, one alternative might be to "brand" your first image (thumbnail image) with an AutoCheck logo. This way on the Search Results Page consumers could see that you have this. If you used Dealer Specialties, we could do this for you, other providers can also likely do the same.

Oct 4, 2012

Jeremy, you hit the nail on the head. I share your exact observations. They are definitely taking advantage of dealers. I refused to pay carfax what they wanted. If you file a complaint with the FTC, lets have the NADA and various state dealer associations know about this, to support a solution to this potentially unfair trade practice or anti-trust situation.

Oct 4, 2012

Autotrader and cars.com should know that Google Autos is in test mode with a handful of west coast dealers. Once it goes national things could and probably will change. We are considering dropping the lower performing site and giving Google Autos a try. Imagine what would happen if all dealers dropped cars.com or autotrader! Consumers would still buy cars, they just would go elsewhere to find them!

Oct 4, 2012

Another example of a corporate cult trying to impose its will on the marketplace. Got to love BMW's solid business decision.

Oct 4, 2012

Jeremy understands the power of branding for his own purposes. He pays BMW a huge premium over an alternative auto maker so that he can leverage the investment BMW has made over the years in their brand. He pays Autotrader.com and Cars.com a huge premium over a lesser trafficked inventory site to leverage the investment they have made in their brands. I'm confused why he doesn't wish to apply the same logic to Carfax?

Oct 4, 2012

Jeremy understands the power of branding for his own purposes. He pays BMW a huge premium over an alternative auto maker so that he can leverage the investment BMW has made over the years in their brand. He pays Autotrader.com and Cars.com a huge premium over a lesser trafficked inventory site to leverage the investment they have made in their brands. I'm confused why he doesn't wish to apply the same logic to Carfax?

Oct 4, 2012

Hey Philip,

Thanks for the comment and reading my post. First, in the interests of full disclosure, I'd like to clarify if this is the same Philip Moore that lists his occupation on LinkedIn as the Director of Strategic Insights at Carfax? Second, to answer your question, I absolutely understand the importance and complexity of branding, and I'll address your concern.

While many car shoppers may know CARFAX, I feel many more shoppers know that Experian is the company that supplies their personal credit report - the same company that is supplying the "credit score" necessary to finance the car they're researching – never mind the same score for other important life decisions (e.g. mortgage, loans, etc...) Second, from a high-line standpoint, it is my opinion that your CARFOX icon damages many premium brands - I certainly will not promote it at my dealership. Finally, one more point, I've seen many of your TV ads that, in my opinion, attempt to portray car dealers as untrustworthy and unscrupulous businesses - and therefore pushes consumers to trust CARFAX over the dealer. So, to answer your question, yes I understand branding and it's my opinion that CARFAX, as an overall brand, is not stronger than AutoCheck/Experian.

Thank you,
Jeremy

Oct 4, 2012

We tried carfax for 6 months and made no difference. So we are using autocheck and we have sold more cars than ever. I think that the idea of getting the autocheck logo in the first picture it's a great.

Oct 4, 2012

Here are 2 things that Carfax offers that I'm surprised don't get mentioned very often:

1. They provide a "Warranty Check" that lists all of the warranties that are on each vehicle.

2. They tell you if there are any opened recalls on the vehicle.

Is there an economical way to get this information without the Carfax? If you have to spend 20 minutes on the phone for each vehicle you don't know the exact warranties on, that could take a long time and there could always be issues with vehicles if you sell it to a customer and it has an opened recall on it.

Oct 4, 2012

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.

Oct 4, 2012

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