Transparency to Heal Buyer Mistrust of Dealers

Transparency can go a long way to making customers enjoy their car-buying experience, according to a new survey from the TrueCar Buyer Study.

Consumers believe that auto dealers’ profits on new car sales are almost five times higher than they actually are.

TrueCar found that consumers believe the dealer makes about a 20% profit on a $30,000 car, when in reality dealers made about 3.8% profit on the sale of a new car in 2013, according to data from the National Automobile Dealer Association.

The survey, conducted in February, polled more than 3,000 consumers across the U.S., and was commissioned by TrueCar to study consumer perceptions regarding profits earned in the car-buying experience.

On average, participants believed that about 10% to 12% would be a fair profit margin on the sale of a new car, and that if dealers made 0% profit on new car sales, they would be willing to pay an extra 8% on top of each purchase, as a tip.

“If consumers believed that they were getting information that they could trust as part of a more transparent process, they would be willing to pay dealers more,” Scott Painter, TrueCar founder and CEO, said in a press release. “These survey results are consistent with the idea that increased transparency in the car-buying process can result in higher margins for dealers and greater consumer satisfaction. With upfront and transparent information, everyone wins.”

The survey also found that about 26% of car buyers felt they had overpaid for their purchase and that 32% of car buyers said that they would not return to the same dealership due to low customer satisfaction with the purchase process.

TrueCar.com is an online platform that promotes a negotiation-free, car-buying experience.