CarGurus’ test with Carvana irks other auto dealers

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“One of the biggest pain points we hear in the marketplace is that an access to inventory for dealers is really difficult,” he said. CarGurus, meanwhile, has access to 38 million visitors coming to its site, Zales said. And with some consumers showing “seller’s fatigue” with peer-to-peer marketplaces such as Craigslist, the company spotted an opportunity.

Zales said CarGurus initially did a “pre-alpha test” with an unnamed national brick-and-mortar account. But he said the company realized it needed a more “real-time process” with advanced technology, and the ability to offer firm, binding bids to consumers for buying their vehicles.

“So we went to Carvana, a player that we knew had this technology and would enable us to continue to move to ‘alpha test,’ to test that program and see if it worked over time,” he said. “I’m pleased to say we have now come out of alpha; we’re moving to beta, which means we go to a next set of dealers.”

He added that CarGurus would soon announce another large brick-and-mortar partner for the tests.

Once the product gets through beta testing it will be available for more dealers, and the company was soliciting applications from dealers to be part of the beta test, so long as they could give real-time, binding offers.

By early March, as the test continued to operate, for some dealers, the frustration continued to mount.

“What I get frustrated with is they took thousands of dealers that were loyal to them and set them aside in favor of one national client,” said David Kain, president of Kain Automotive.

Kain said he had been fielding calls from upset retailers, and the cash-offers-from-Carvana tool became a cause célèbre of some dealer 20 groups.

“Acquisition of used cars is obviously a big issue for dealers,” Kain said. “And so what we are concerned about is when the CarGurus technology plays favorites with Carvana, and they take what is notably landscape that dealers have paid for online and basically make it a direct link into Carvana.”

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