You might have heard of an insurance broker or a stock broker. You definitely have not heard the term “car broker.”
A lot of people are anti-car broker. They don’t want a “middleman” because it means they will probably pay more for the service.
Now I am going to try to talk about car brokers and all of the benefits of working with a car broker. This will probably be a surprise, so please keep reading.
What is a Car Broker?
A car broker (or auto broker) is an automotive professional who usually has a sales background and provides a service to car buyers by sourcing and negotiating a car purchase or lease on a buyer’s behalf.
Just like stock brokers are familiar with stocks and insurance brokers are familiar with insurance, car brokers are familiar with cars (and they know them very well).
This means that if you’re looking to buy a car and you use this service, the broker will perform all of the searching and inquiring of vehicles on your behalf, leaving you with just the final decision of what deal to sign.
What Happens When You Work with a Car Broker?
Once you’ve identified a legit broker with positive reviews and history, you’re ready to go. The first step may be to simply put down a retainer with broker, probably around $100 or so to begin the process.
Not every broker will require the same, but it’s good to be aware that this is normal practice. Then, he’ll want to know all the things you like and don’t like in a car/build/brand. Be as specific as possible.
Now he will start searching of a car based on the things you listed that you want to have. If you have provided a sufficient and sensible level of detail, then the odds will be better that they will come back to you with vehicles you are interested in.
If you are too vague – “just get me a blue car,” for example, the process just becomes longer and more aggravating.
Once you have determined what car you want, then you get to the issue of payment. Some brokers just take a flat fee, while others will take a percentage of the price paid vs. the value of the vehicle whether it be a new or used vehicle.
As a good general rule of thumb, most have discovered that the fees on used vehicles are higher than for new, as locating particular used cars usually add more work for the broker.
If they take a percentage, it will typically be determined by the amount you pay vs. Kelley Blue Book (KBB) value.
So if they saved you $5,000 on a car compared to reimbursement KBB value, the broker will get a percentage of that $5,000. This is to their advantage to keep searching to get you the most price cuts.
Benefits of Using a Car Broker
As I stated in the introduction, it feels counterintuitive to bring in a third party into the car buying affair.
Your gut is suggesting that it may make the whole thing easier, but will cost you a lot more. In this section, I will be discussing the many real advantages of using car brokers.
#1. Financial Advantages.
Let’s start the discussion with the most counterintuitive financial advantage to using a broker. Believe it or not, in a lot of circumstances it is possible to save money with a broker, even with the added costs of the middleman.
The reason most brokers can provide some financial benefit to you is the fact that they themselves are invariably car sales professionals. Many brokers start their journey in the auto financing world by working at dealerships.
Thus, they have learned all the tricks and know all the terminology, more importantly, they know how the sales people at the dealerships work.
In addition to that, brokers have more access to car financing and will have better knowledge on where to locate car financing based on the car you are looking for and in particular, your situation.
Money brokers seek and negotiate deals for their customers, are almost always the best negotiated deals possible. You may be a savvy negotiator in life, doesn’t mean you will be able to negotiate the best deal on your next car! A broker will do that for you and help save you money.
#2. Locating the Perfect Car.
Searching for cars on your own can be exhausting. While searching for cars, many people ultimately choose something that is less than they wanted.
Maybe it’s the right model but the wrong color. Or it’s the right price but the wrong model year.
Getting all the elements right when searching for cars is difficult, at least for most of us. But for an experienced and knowledgeable car broker, it is easy.
When using a broker, you are guaranteed a better chance of acquiring the car you want without compromising on anything.
Brokers are especially adept at locating models that are unusual, special edition, or otherwise difficult to find. Even rare vehicles you want that your dealership have access to.
#3. Frees Up Your Time.
When you’ve followed down every possible lead and connection, and eventually come up with the perfect car that meets all of your requirements, you quickly come to realize how much lighter a burden tending to that inquiry is with a broker instead.
The advantage brokers have is that they can rely on their extensive experience that can help them quickly narrow down the places where they might ask you to look. The broker doesn’t have to investigate every possibility, because they know ahead of time which options to stay away from.
You may think that you can go through the inquiry and want to do it yourself. If you have the time and energy to devote to that, then that is fine. However, it turns out, a lot of people have neither time nor energy to spend on one or both of those scarce resources.
Allow the car experts to do the searching and increase the stress on you as you continue doing what you do. Even if you end up spending more by virtue of relying on a broker, it is a minimal premium to pay for the stress-free experience.
#4. Less Stress (dealing with salespeople).
Aside from restoring your time and energy, auto brokers take the stress out of the car buying experience by dealing with the car salespeople.
When a car dealership is dealing with an everyday customer, there is an entire playbook of sales talk and upselling techniques they will try to employ to get you to spend more money, which is to be expected.
The dealership is a business and they are in the business of making money, but for many car-buyers, it turns that special moment of buying a new car into a long, stressful process.
Every phone call to the dealership becomes stressful, because you have to think about how the salesperson is going to react and then how they are going to reactivate their strategic verbal gymnastics to help you rationalized why the perfectly reasonable thing you ask for is a dumb idea.
The brokers take care of this headache for you, and you are left to only have to make a final decision of which car you are going to buy, upon signing the paperwork and making payment.
As many of them are former car salespeople too, they know the score and can’t be fooled by any of it.
#5. Brokers Work for You (Or at Least They Should).
At the end of the process, a car broker is someone who is working for you. They don’t work for the dealership, and therefore, they are incentivized to get you the best possible deal. Their reputation is based on their capability of getting you the car you want – at the best possible price.
There is a slight danger to note that buyers should be aware of here. Any broker who says they will provide their service to you for little or no fee at all to you, or without any financial incentive coming from you (like the retainer I mentioned earlier) is usually a sign that the broker is working (even unofficially) for one of the dealerships, and making money from commissions or kickbacks.
If a broker attempts to persuade you one-way or the other, or tries to push a specific model or brand on you, then start to take notice. Brokers are not salespeople, they are agents, and their only job is to get you what you want. If they suddenly start selling you, consider it a red flag.
That is a small bit of the advantages of working with a car broker. Next time you are looking to purchase a used or new vehicle, you may consider making the broker’s experience and connections your ally in getting the best possible deal.