What Are Car Brokers and Should I Use One?
Brokers versus Dealerships?
If car dealerships are the direct source of car deals, then think of brokers as the middle man between dealerships and yourself. If you go through a car broker instead of a dealership, you will always get a better deal on your lease/purchase. Most brokers work with managers or dealership owners to set discounts that very few consumers can acquire even after spending hours visiting multiple dealerships and negotiating offers between them.
An auto broker is familiar with car dealership’s sales tactics, strategies for negotiating, and profit margins. They know how and where to save money throughout the entire process. They won’t fall for some of the numbers manipulations or specific strategies that might work on other customers. Instead, they’ll see these tactics coming and have a rebuttal already prepared.
During the CoViD-19 pandemic, car brokers rose even more to prominence, as they were the only source for consumers to get deep discounts. For example, nearly all dealerships adjusted Jeep Wranglers up to 25% over MSRP.
Brokers offered the Jeep Wrangler 4xE (Rubicon, Sahara, and High Altitude) at 10% off MSRP for a custom order on top of the $7,500 Federal PHEV credit. This resulted in ~20% off MSRP for a brand new, custom order. Customers had upwards of $10,000 in equity in their leases! Some sold their vehicles for a hefty profit.
Types of Brokers
First thing you should know is all car brokers operate differently and that does not necessarily make one broker better than the other.
However it is in the best interests of the consumer to be aware of how the business works.
Some charge you a flat fee and do not get paid by the dealer
This category of brokers typically has your interests in mind as they work for you and there exists no conflict of interest. At times they are referred to as buyers agents or liaisons.
Some get paid by the dealer and claim no broker fee and do not collect a fee from the consumer.
These brokers get paid what is commonly referred to as a “bird dog” by the dealer. This can be a flat amount, usually $500-$1000 a car or even more if the deal is not that great.
Some short the cash to the dealer as their commission and do not collect a fee from the consumer. They either ask you to provide to them directly the agreed upon amount due at signing, or your first month payment. They then short the amount to the dealer and pocket the difference. At times this amount can be thousands of dollars. These are usually NJ/NY/FL/CA brokers who are likely licensed