Electric vehicles ‘attractive’ as they come back as used cars, TrueCar CEO says

TrueCar CEO and President Mike Darrow joins Yahoo Finance Live to discuss the auto space, car shortages, industry trends, electric vehicle demand amid high gas prices, and tips for online car shopping.

Video transcript

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BRIAN CHEUNG: Used car prices fell for the third straight month, declining 4/10 of a percent between March and April. But anyone that has tried to buy a car lately will know that prices still remain relatively high. For more on the used car market, let's bring in TrueCar CEO and President Mike Darrow, alongside Yahoo Finance's Pras Subramanian, a very interesting conversation here, gentlemen.

I want to start with you, Mike, just to kind of ask you about how TrueCar is viewing the used car market prices again across the board. You're trying to buy a Honda Civic even and it's a high markup compared to where it was pre-pandemic. How is TrueCar navigating this environment right now?

MIKE DARROW: Well, prices are certainly high, Brian, as you mentioned, on the used car side. And a lot of that is driven by limited new car availability. The new cars are down around a million units in franchise inventory for our dealers. And that number was over three million units pre-pandemic. So the limited supply of new cars is creating space for used car pricing, and that's what you're seeing in the market right now.

PRAS SUBRAMANIAN: Hey, Mike, Pras here. So TrueCar's business is sort of linking up buyers and sellers online across numerous dealerships and numerous types of buyers. What's this new program you're doing in Florida, and how is that working with people buying stuff fully online?

MIKE DARROW: Yeah, Pras, thanks for asking. We've launched a new program called TrueCar Plus in Florida, where we're enabling consumers to go from what we call from discovery to driveway. So they can start their research on our site, they can find a vehicle that meets their needs. They can actually calculate a real monthly payment, either a loan or a lease, get a cash value for their trade in, actually apply for financing directly online, and then sign a buyer's order right on our platform.

So there's been a trend for more and more of the shopping experience to move online. And with TrueCar Plus, we're bringing the entire experience and the ability to buy the vehicle. We've even done some testing and we're beginning to ship vehicles in Florida if a consumer wants a vehicle delivered to their home.

AKIKO FUJITA: Mike, it's Akiko here. We have seen high fuel costs really accelerate the EV adoption, with EVs doubling its market share. And I wonder how much of that has trickled down into the second hand market. We've heard reports, at least over in Europe, where they're seeing more and more used EVs. What are you seeing in your market?

MIKE DARROW: Well, we are starting to see the original set of EVs that were sold new come back to the market. They are an attractive used vehicle right now. And as gas prices stay high, you know, I'm here in Southern California and gas prices are approaching $7 in this market. So you know, I think as gas prices stay up, as more and more used cars, EVs come back as used cars, they'll be viable alternatives on the used car market.

PRAS SUBRAMANIAN: Hey, Mike, so sticking with used cars, talking about the TrueCar model, how is that, is it better or different or is it a preferable model compared to the Carvanas and the Vrooms of the world, where they actually have to buy inventory and sell cars actually service them and sell them versus what you guys do, is match buyers and sellers

MIKE DARROW: Right, yeah, we like to talk about, Pras, is we have a very asset light model. We sit right in the middle of supply and demand. We want to be the technology and the platform, the marketplace, if you will, that connects consumers with our retail partners and enables that transaction to happen. And we'll continue to advance it from a digital perspective and allow consumers to do more and more of that in the comfort of their home.

PRAS SUBRAMANIAN: And, Mike, you've been around the business for a while both at the OEM level and also at the Edmunds research level, and now TrueCar. What are some of your big tips for people looking to buy a car new or used right now, given where the market is?

MIKE DARROW: Yeah, I think the biggest tip I can give people is, do your research online. The days of being able to drive to your local dealership and shop through a big selection don't exist anymore. You need to do your research, use a site like truecar.com, find a vehicle that meet your needs, spend some time understanding the affordability of that vehicle. There's a lot of tools out there to help consumers make sure they're looking at the right type of vehicles. And do as much of that work online before you go and meet with a dealer and try to execute a transition at retail.

BRIAN CHEUNG: And, Mike, lastly, I want to ask here about your company and just kind of how you're watching the noise right now. Because you're traded as TRUE, T-R-U-E, but it's been a very rocky environment for you and your peers in the used car marketplace industry. We saw what happened with Carvana stock this week falling precipitously.

Your stock holding up pretty well a year to date. But just kind of wanted to ask about investor pressure. Is the interpretation here that look, at the end of the day, if used car prices continue to fall down, that's worse for your margins? How difficult is it to kind of read what shareholders are looking for right now?

MIKE DARROW: Well, we're certainly feeling some of the pressure of what's going on in the marketplace right now, Brian. We're fortunate in that we've got a really strong balance sheet. We've got a lot of cash on hand and no debt. So we're trying to stay focused on what we want to accomplish. We want to bring more and more of the buying process online, make it easy and transparent for a consumer, and efficient for our retail partners. So we're staying focused on what's at hand for us. But we're certainly feeling some of the pressure that's going on in the market for sure.

AKIKO FUJITA: Well, Mike Darrow, it's good to talk to you today. TrueCar CEO and President, alongside Yahoo Finance's Pras Subramanian.