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As the founder and CEO of CarGurus, I wanted to clear up some confusion that seems to have arisen about how CarGurus operates and how we deliver value to dealers.
Who We Are
CarGurus is operated by an experienced group of professionals. Our board, and management team include current and former senior executives from Ebay, Expedia, TripAdvisor, Edmunds.com and Yahoo.
In my former life I was the Chairman and co-founder of TripAdvisor, now the largest online travel site in the world.
In just the last few years, CarGurus has quickly grown to become the 9th largest and fastest growing automotive shopping site in the U.S. Last month alone, our site served 6 million shoppers.
How is this relevant to dealers? CarGurus has substantial scale and is operated by experienced professionals who take their responsibility to both consumers and dealers quite seriously.
How CarGurus Works
Much confusion has arisen over how CarGurus ranks used car listings in our shopping service. I want to explain how CarGurus actually works. Every night, CarGurus analyzes over 6 million listings using a proprietary valuation model to determine each car’s Instant Market Value (IMV). Our IMV calculation takes into account many variables that affect value, including a car’s make, model, trim, options, mileage, location and vehicle condition, among other variables. These variables are used along with local market comparables to derive an IMV calculation for each car in our inventory, every day.
When a user searches for a car, CarGurus analyzes the available local inventory and ranks the matching listings based on a consumer’s savings relative to our IMV. Cars priced with the greatest customer savings rank highest in our search results. CarGurus gives an additional ranking boost to listings from dealers that have received positive consumer reviews from CarGurus shoppers. In this regard, CarGurus is about showing consumers the best deals from the best dealers.
I want to assure both shoppers and dealers that the valuation models we use are based on extremely large, statistically significant data sets and do take into account the many variables that affect a car’s market value. The results are data and math driven and in no way subjective.
Some online commenters have implied that CarGurus favors certain dealers in its inventory ranking algorithms. This is not true.
CarGurus search results are not subject to any bias. The listings are ranked solely based on the consumer’s savings and the dealer’s reputation. Cargurus does not give any preference to dealers that work with CarGurus directly or via CarGurus partners.
CarGurus does offer a Featured Placement program whereby participating dealers can buy an advertising package that will promote their inventory to the top of the search results on every search page. However, these Featured Listings are clearly marked on CarGurus and are separate from the organic search results.
CarGurus takes seriously its obligation to remain unbiased in how it represents inventory to consumers and on behalf of dealers. The organic search results on CarGurus are based solely on our mathematical models.
So How Does CarGurus Help Dealers?
As I mentioned above, CarGurus takes its responsibility to consumers and dealers equally seriously. We understand that we have to deliver value to both constituencies. So how do we help dealers? The answer is simple: CarGurus helps dealers sell cars.
Because of the unique way that CarGurus ordinates its search results, 95% of the leads sent from CarGurus to dealers each month are for inventory that has been validated by CarGurus as a Great, Good or Fair deal.
As a result, these leads convert to sold vehicles at rates far above the industry average. Consumers going to dealers from CarGurus do so with 3rd-party validation that the car in question is a Fair to Great deal. No other listings site on the web generates lead inquiries with this built-in pricing validation.
How Can CarGurus Designate a Listing as “High” or “Overpriced”?
Some have asked how CarGurus can label a piece of inventory as “High Priced” or “Overpriced”? Please know that these valuations are not our personal opinions. Rather, CarGurus market valuations are based on similar local market comparables. Depending on whether a listing is priced above or below the market, we designate it as a Great, Good, Fair, High Priced or Overpriced deal.
While CarGurus does have proprietary valuation technology that automates the process of inventory valuation, 3rd-party inventory valuation tools are not a new phenomenon to the online automotive space. Many sites like KBB, NADAGuides and Edmunds have offered manual valuation tools (where a consumer manually enters the trim, options, mileage, etc.) for many years.
Connecting Consumers and Dealers
Each month, CarGurus has over 6 million consumers visit our site to shop for a new or used car. Our goal is a simple one: to connect shoppers with dealers. Much like my last company, TripAdvisor, we do so by providing information transparency (pricing, dealer reputation and inventory in local markets). In the end, judging by the conversion rates (sold cars/leads sent to dealers) we see from our dealer partners this unique focus on transparency is a good thing in that it ultimately leads to a more qualified buyer arriving at your store. In the online travel industry we used to call this the quest for “bookers,” not “lookers.” CarGurus is about driving buyers, not lookers, to your store.
I hope this information will help dealers better understand how we operate and how we can help you sell more cars.
Founder/CEO - Cargurus