SANTA MONICA, Calif. -

In a special interview with Auto Remarketing Tuesday, TrueCar’s chief executive officer revealed that Raj Sundaram will continue on with Automotive Lease Guide for at least two years as an advisor to ensure a smooth ownership transition and help maintain the guidebook’s independence.

Scott Painter explained that ALG will continue running as it has in the past even once it goes under new ownership and that the industry will not see changes.

His company announced late Monday it is purchasing the popular residual value guide from DealerTrack. TrueCar’s mission is to simplify and clarify the car buying process for consumers by providing accurate market information via its site, which can help buyers make better, more informed decisions.

Sundaram was at the helm of ALG when it was purchased by DealerTrack in 2005. He went on to be named senior vice president of the solutions group for DealerTrack, but remained very involved in ALG’s business.

“Raj Sundaram was CEO of ALG for a number of years. DealerTrack has a deep understanding of the business, so we felt it was important that Raj and the team stay involved so we signed a multi-year agreement. A number of leading individuals at DealerTrack, who know ALG well, will remain involved. And Raj is an incredibily important part of that equation,” Painter told Auto Remarketing.

So basically, Sundaram will be doing double-duty, serving as an advisor for ALG as well as continuing in his role with DealerTrack.

Discussing the transaction with Auto Remarketing Tuesday, Sundaram said selling ALG was a tough decision for DealerTrack.

"We absolutely plan to help TrueCar with the transition, making sure it’s business as usual. We really want to keep ALG doing what it does today. The company is doing a great job at what it’s supposed to do. We want to ensure that all customers are extremely comfortable about what this could mean and the opportunities this presents," said Sundaram.

But the decision to sell was made because TrueCar is also a data-driven company and it plans to invest in ALG and help the residual analyzer grow. With DealerTrack having so many pots on the stove, it just couldn’t give ALG the same level of support, Sundaram said.

For instance, Sundaram can see ALG’s website becoming much more consumer friendly and better explaining exactly what residuals are and what they mean.

"ALG has always had great data, such as our annual residual value rankings and awards. A ton of OEMs and manufacturers leverage these and a lot of consumers get on ALG.com, but they might not understand what the award means. What does ALG do? What does residuals mean for owning a vehicle? These are questions consumers might ask," Sundaram noted.

Also speaking frankly with Auto Remarketing, Painter explained that his company is not looking to change anything about the way ALG does business, but simply pour more resources into the company to drive and improve its business.

“At the highest level, we fundamentally believe that the cost of ownership is connected to residual values. This is for everyday consumers,” said Painter. “This acquisition is about our commitment to data and accuracy. ALG is the industry leader in residual values, and we will continue to run it as an independent company. We are committed to maintaining the people and processes that are there.

“We will invest in ALG to give them more resources to become a bigger company. Because we’re also a data company, we understand and we want to give them that kind of support. It is already run as a standalone, stable company, so really our resources will be added to their agenda and not ours. We are looking to make their product more robust. We believe in the continuity of business, and we want to provide this continuity through the DealerTrack relationship (two-year transition),” he added.

He stressed that OEM and banks will not see any changes in the way business is done at ALG.

Coming back to Sundaram, the DealerTrack vice president said ALG is already hard at work on 2012 residuals and the team is being more conservative in setting these.

"ALG is extremely vigilant in watching the strength of the used-vehicle market and paying attention to where new-vehicle sales are going and more. ALG is cautious. This is what ALG is known for, being accurate and being able to forecast some of the trends. We’re somewhat more conservative for 2012 models compared to 2011," he explained.

"It has been a great 12-18 months for used-car prices. But our number one goal is to really keep ALG doing what it does today and help the company fulfill its growth goals," he continued.

As part of the deal, DealerTrack will continue to have access to certain ALG intellectual property or data in its products and services, with a perpetual, royalty free license.

Management of both companies describe the transaction as a tax-free reorganization. For the sale of its subsidiary, DealerTrack is receiving 15 percent equity interest in TrueCar and has the option to increase ownership interest to 19.9 percent in the future.

The sale is expected to close in the fourth quarter, subject to customary closing conditions and regulatory approval.

DealerTrack management said it expects to recognize a pre-tax gain for GAAP purposes of at least $40 million on the sale, but officials do not anticipate that this will have an impact on 2011 non-GAAP guidance.

Mark O’Neil, chairman and chief executive officer of DealerTrack, said Monday, “This transaction exemplifies our strategy of effectively allocating capital to maximize value for DealerTrack stockholders. We are not only selling a business which we have grown significantly since we acquired it back in 2005, we are making an investment in a high-growth, progressive company that is positively impacting the way cars are retailed in the U.S. market.”

Bernie Brenner, chief strategy officer of TrueCar, went on to say, “By working alongside ALG, we can achieve deeper and more meaningful partnerships with auto manufacturers. Through the transparency and effectiveness of TrueCar and ALG data we will create an efficient environment where the auto industry sells more cars and dealers can thrive in an ever-changing, competitive marketplace.”