Using a Car Broker to Buy Your Next Vehicle
For a growing number of consumers, a lack of time and patience for buying cars has piqued an interest in hiring a professional to do it for them. And to help serve this market, a cottage industry has emerged to search the nation for the perfect car for you for a fee, of course.
But like any deal, it's important to do a little research on the broker before you jump headlong into their arms, drawn by promises of lower prices and advocacy for your needs. And don't forget, just because your broker is saying it's a great deal doesn't mean that it is.
The concept behind hiring an auto broker is relatively simple: you're not a professional car buyer, so why go up against a professional car seller alone? With the confusion of financing, fees, add-ons, taxes and the hurried, jargon-filled nature of the dealership, it only makes sense to leave the bargaining to someone who won't be fazed by the wheeling and dealing.
And thousands of satisfied consumers have been glad they did. Countless success stories have been told and retold about the thousands of dollars people saved over a "best-price" offer made one day from a dealership, only to have a broker secure a better price just days or even hours later.
"I consider myself a good negotiator and this was my first time using an auto broker and we had a very positive experience," said Junmo Lee, who recently bought a Toyota 4Runner near Denver. At first, he went the traditional route, heading over to a dealership and working with a salesman. But after reaching an impasse with the sales staff, Lee decided to walk out and hire a broker.
Sure enough, a local broker was able to secure a price about $500 cheaper than he was originally quoted on the exact same vehicle from the same dealership. This is possible because brokers usually have experience with dealerships and know exactly how much they can afford to charge based on how long the car has been on the lot, how many more they have coming in and how much dozens of other dealerships are charging.
But much of what a broker provides is convenience and peace of mind. After paying a flat fee for the service, Lee found that he likely would have only paid a slightly higher price on his own, but thought the experience was easy enough to win his business the next time he buys.
"I don't care for the antagonistic negotiations with salespeople anymore," Lee said. "We're telling everyone we can about the broker."
Types of Brokers
One of the tricks to using a broker, however, is figuring out what kind of auto broker you're dealing with. A simple look through the phonebook or Internet search can scrounge up dozens of names, but not everyone is really working for the consumer.
A pure, consumer-driven auto broker usually works out of a small office or home office with a skeleton staff, charging flat-fee buying services to any customer who asks them to. But don't feel limited to hiring a broker in your immediate region. As the market for broker-represented buying has spread, many brokers have started working from Web-based traffic and taking on clients around the world.
"I can do new and used car deals for anyone, no matter where they live," said Dave Sutch, CEO of MyCarGuy-SF.com, a brokerage in San Francisco. "I am meeting with someone today who is from New Zealand and wants a 2000 Ford F-150 Harley-Davidson truck. [And] I recently was able to negotiate the purchase of a new Honda Accord for over $1,500 lower here than any dealer in the customer's home state of Washington."
While many brokers are former car dealers, they should not be receiving any compensation from dealerships for passing your name along as a lead. Many operations call themselves brokerages, but make substantial amounts of their profits from dealerships, or even directly work for a dealership. This isn't illegal or even unethical, but can lead you to question whether they really have your best interests at heart.
"There are many people and services posing as brokers or leasing and buying agencies," said Jay Green, owner and founder of AutoSeek.com in Los Angeles. "The best way to check would be to call some random dealerships near them and ask if they have heard of the person or service and what they have to say about them."
Feel free to ask questions about the broker, his or her background, the fee structure and the history of the company. Most reputable brokers are proud of their independence from dealerships and will openly boast about how well they know the tricks dealerships can pull.
"For most people, the initial salesman is about as high on the food chain as they're likely to have access to," AutoSeek.com's Green said. "These people are not qualified to answer my phones, much less look after our clients' best interests."
Fees for these services can start at $200 and can go as high as $1,000 normally, based on the car you're buying and whether it is a new or used model. Used cars and rare cars tend to carry a higher fee since it takes more legwork to locate a good deal; although, you'll likely see an even deeper discount from what you could have bought on your own thanks to regional differences in used car prices.
Your broker should charge you on a flat-fee basis, agreed to before purchase. This way, the broker only makes money when he or she gets a great deal for you and can't drive up the fee by putting you in a more expensive car.
If you don't want to spend hundreds of dollars, wholesale clubs like Costco and auto clubs like AAA offer car-buying services similar to what brokers offer. Even a site like Carsdirect.com basically operates as a broker. Normally, these services operate by working out special pricing with one dealership in a market that can be offered to members in return for referrals. While this isn't a true brokerage arrangement, the service is often free or very inexpensive and can often take much of the haggling out of the car-buying process.
A consumer can often get similar deals by simply calling or e-mailing a dealership's fleet or Internet manager and negotiating prices through them.
In the end, most consumers can save hundreds if not thousands of dollars by hiring a professional to broker the purchase of their next car. But beyond the dollars, you're also saving hours of hassle in avoiding the traditional walk-up or even an Internet-based dealership experience. And that can be the most valuable benefit of all.
What to Look for in a Car Broker
- Make sure the broker is licensed to legally sell cars in your state.
- Ask questions to the company or individual about how they find deals on cars, what background they have in the car business and if they receive any money from dealerships or carmakers for making deals.
- Look for feedback about other customers' experiences with the broker on auto chat boards, like Edmunds.com's Town Hall forums.
- Confirm that broker fees are charged on a flat-rate basis to ensure that you get the best deal on your car.
- Check with any wholesale clubs or auto clubs to see if they offer car-buying services free of charge.