How An Auto Broker Works

how an auto broker works

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Now, a lot of car buyers select to buy vehicles via auto brokers. But is a professional car-buying agent worth the money when you can broker your own deal at the dealership? In most cases, it depends on what you should purchase, whether that be a new car, a used car, and a lease. It depends on how much you know about the finer details of car purchasing and how much time you’re willing to spend haggling at the dealership. You need to ensure you are covered with an affordable car insurance policy. The final consideration is the price. But if you hire an auto broker that’s worth their salt, the price of their services will seem minuscule compared to the lots of dollars you save on the deal.

Types of Auto Brokers

Car Broker and Auto Broker:

  • Can work for dealers, buyers, or a combination of the two.
  • Maybe a small company, an independent agent, or a big, Internet-based service.
  • Frequently staffed by former car dealers and dealership managers who understand all the ins and outs of how dealers make money.

Club or Bank Car-Buying Service:

  • Service offered for a free and small charge by your bank, credit union, AAA, and Costco.
  • Frequently has prearranged pricing with local dealers.
  • Cannot negotiate rates as low as a top auto broker but cuts down on time and hassle at minimum price.

Car-Buying Concierge:

  • Charges a flat fee, depending on the vehicle’s value.
  • Works in the client’s good interest, not dealerships.
  • Frequently offers delivery, trade-in services, signing.

What Does a Car Broker Do?

First and foremost, a car broker is in the industry. That means they can cut red tape and save you the trouble of trying to negotiate a good deal and haggle over small details. If you are intimidated by the idea of talking to salespeople, a car broker is on the front lines on your behalf. You tell the broker what you need in terms of models, years, features, cost range, and they can search locally and even nationally to find what you need. The savings may be important, from hundreds to even lots of dollars. With your wish list in hand, a car broker is capable of cutting to the chase effectively. Because several car brokers are car salespeople in the past and are aware not of the tactics and plan sales professionals use but margins and prices, they know the ins or outs of working a deal. Obviously, the broker is going to charge a fee for their service, but depending on the car you want, this can end up being a much better deal for you in the long run.

How Does the Process Work?

Car brokers will work for a flat fee, so you need not worry about surprise prices down the road or percentages of sales that may rise based on the car’s value you finish buying. The fee needs to be the same irrespective of whether you are purchasing a simple, reliable family sedan or a high-end and extravagant sports car. You will probably have to pay a retainer, to begin with, to prove you are serious about their services, and then you should fill in the details. The car broker will be most effective with details from you which may be provided during a short meeting or likely even over the phone. If you want a black car, it opens up many possibilities. But if you explain the budget, that you need a specific number of features or you need a car no more than 5 years old, that refines the search and lets the broker focus on precisely what you want. This process will take some days. The caveat to that’s that you can need extra time if you have more certain demands. When the broker has found a few choices that meet your needs, they will inform you of what they have found and you can select which car meets your requirements. The broker can close the deal and your car-buying experience may go ahead relatively stress-free. They will end up buying and literally drive the car to you to drop it off. All that you will require to do is finalize some paperwork, and the deal is done.

Do Auto Brokers Save You Money?

Auto brokers bring negotiating skills on your behalf. They know the details of dealerships, buying, and financing in a way that the usual car buyer will likely not learn. These brokers have years or decades of experience in the industry, frequently on the other side of the desk. Many are past salespeople or dealership managers. They know how to wring the low possible cost out of local dealers because they understand precisely how much money the dealer will make from manufacturer rebates, warranties, extras. You can work the deal out yourself, but you can be missing out on bigger discounts. Sometimes, the savings you forego can be worth thousands of dollars. The level of expertise you should get the good deals cannot be something you can learn in a weekend. You should understand lease rates, bank shopping, the buying rates of dealers, the price of their money. If you are diligent you can do it, but any great broker will know all of that stuff. The best auto broker lease deal can save you time and frustration. Most buyers spend a minimum of half a day on the car lot, haggling over the automobile they want. First, you haggle with the salesperson, and then, once you have worked the cost down to maybe $500 above invoice, you move on to the finance and insurance office. This Is where great deals frequently go bad. The F&I agent is paid very well to make back the money given to you at a discounted price by hiking insurance rates, playing with the price of extras and warranties, and overcharging for insurance. An auto broker can do all of the hard work on your behalf and drop off the car along with the completed contract for you to sign in less time than you may have worked it out yourself. Auto brokers may help you find any of the following:

New cars: This is the most famous assignment auto brokers take. One of the amazing benefits of new car brokering services is that they can get you the certain color, upholstery, and factory-installed features you need on the model you like. Dealerships frequently charge more for these services or claim that the automobile you want is impossible to find in the color and specifications you have in mind, simply because they do not carry it themselves.

Used cars: Used car brokering is less known than new car buying services, but it may be more useful. The dealer margin on used car pricing tends to be wider than new car pricing, which leaves further room for a great used car broker to find you a good deal. Another benefit is that used car brokers frequently charge a percentage of the amount they save you on the deal. That means they work hard to get the best cost possible. Both you and the broker profit from a good deal.

Car leases: Leasing is more confusing than purchasing for various shoppers. The vague terms and minor details of the leasing contract contain several opportunities to spend more than what is necessary. Several auto broker companies provide leasing services for a flat fee to help you feel confident that you’re getting the greatest cost possible on your new car lease. Few leasing agents receive kickbacks from the dealership. This can cause a conflict of interest in the negotiation procedure, so you may want to find an agent who receives compensation directly from the customers, not from the dealership.

How Do You Pick a Car Broker?

Any time you are trusting not your money but your time and safety to another person, you should ensure you are being smart about it. You won’t pick the first doctor you saw in a pop-up ad online, or a real estate agent based on nothing but a sign on a bus stop, so you need to approach a car broker in a similar way. A legit car broker is going to be licensed by your state, and you can research that to ensure they are completely licensed and meet all state qualifications. This is your money; you should not cut any corners to risk your investment. Similarly, be sure your broker is not working with a specific dealership. That is a conflict of interest and can mean that their suggestions aren’t essentially on the up and up. If a broker is getting paid by a manufacturer or a dealer, then they aren’t working in good interests. Ask any good broker about their history in a certain industry. Do they’ve experience selling cars themselves, and if so, how much? How do they contact or negotiate with dealerships to find the cars they are securing? How long have they been working as a broker and how much work do they do? It is worth doing a little research on your own to ensure you are selecting a reliable broker. The internet needs to be capable of providing you with reviews from past consumers so you can get a general feeling for how well this broker does business and how happy their past customers have been. Inspect the website of the broker to ensure it looks legit and do a fast search to be sure there is some history there.

Is an Auto Broker Necessary?

Technically, not at all. With the Internet’s power, any prospective car buyer can take the time to find all the info they require to get the right car and get the right deal. It does take much patience and time, but it can save you that broker fee if you will rather do it yourself. But if you do not have the time and will rather not spend more energy finding a car and getting the right cost that you want, then an auto broker is the best choice.

Should You Hire a Car Broker?

Car buying is likely an occasional event for you. At the same time, it can be one of the most expensive investments of your life, outside of housing prices. Until you are included in the auto industry, it is probably that you do not have the knowledge and experience of a new car dealership owner and salesperson. Car brokers do. Hiring a car broker is the same as hiring a professional like a real estate broker, a doctor, or an electrician. Car brokers keep their car-buying customers from making mistakes and wasting money. Selecting the right kind of auto broker when you should buy your next car is a smart idea. It is like hiring a former prosecutor if you require a criminal defense lawyer. You are getting a professional car buyer and advocate on your side.

What you should Look for in an Auto Broker?

When scouting for auto brokers, inspect state licensing needs and verify that the broker you want meets state qualifications. Requirements change from state to state. For instance, New York needs all auto brokers handling buy and leases of new and used cars to register with the state. Every New York car broker must carry a $100,000 surety bond. Be sure the broker you select is independent of car dealerships. Beware of brokers offering their services free and charging minimal fees. They can be getting commissions from car dealerships. If so, they cannot work to get you the rock-bottom cost. These car brokers can limit their search and negotiations to a dealership where they have strong ties. Look for independent car brokers dedicated to serving customers. They are in small offices and charge flat-rate broker fees for their car-buying services. Review car broker websites to get an understanding of how the broker’s work. Cars Direct, American Auto Brokers, Elite Auto Brokers are amongst the famous car broker sites. Before hiring your car broker, ask questions about their background, experience, and car purchasing process. You should know how they find car deals, how many cars they have located and sold in the past 12 months, and whether they’ve relationships with specific car dealerships. Contact us online if you are interested in working with an auto broker.

About Marcus The Car Guy

I've been in car sales and finance for over 20 years, working at the highest volume dealerships in the nation including Fletcher Jones, DCH and more. Want to pick my brain on finding cars, negotiating cars, and structuring car deals?

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