What Is an Auto Broker?

With increasingly busy lives and unlimited access to information and products, many people are turning to auto brokers when purchasing a car. However, you might not be familiar with what an auto broker is. Further, you may be wondering if using a professional car-buying agent is worth the money when you could visit a dealership on your own.

Whether you use a broker or not, remember to get car insurance for your new vehicle. You'll likely need it as soon as the new car is yours, and an independent insurance agent can help you get the coverage you need. But first, here's a breakdown of what an auto broker is and when you might want to use one.

What Is an Auto Broker? 

An auto broker is a professional who does all the work behind the scenes to help you find the vehicle you want. They assist you through the full transaction. Auto brokers typically work for and are paid by the buyer. If you work with an auto broker, you'll likely meet on the phone or in person to share with the broker what you want. 

The Main Types of Auto Brokers

There are several types of auto brokers to choose from. It's helpful to understand how each one works to determine if their services and fees are right for you when buying a vehicle. Here are three of the main types of auto brokers and their differences. 

1. Auto brokers

An auto broker might work for dealers, buyers, or a combination of the two. Auto brokers:

• Can be a small company, an independent agent, or a large internet-based service
• Are often staffed by former car dealers or dealership managers who understand all the ins and outs of how dealers make money

2. Club or bank services

Banks, credit unions, or buyers clubs like Costco often provide car-buying services for members for a small fee. This type of auto broker:

• Often has prearranged pricing with local dealers
• May not negotiate rates as low as a top auto broker, but cuts down on time and hassle at a minimum cost

3. Car-buying concierges

A car-buying concierge works in the customer's best interest, not the dealership's. This type of auto broker:

• Charges a flat fee depending on the value of the vehicle
• Often offers delivery, signing, and trade-in services

Each type of auto broker has its pros and cons. One may work better for you than another. That's why learning the key characteristics of each type of auto broker before hiring one to work with can be beneficial.

What Does an Auto Broker Do?

Auto brokers bring knowledge and negotiating skills to the table on your behalf. They know the intricacies of dealerships, financing, and buying in a way that the typical car buyer will probably never learn. Usually, these brokers have years or decades of experience in the industry, often on the other side of the desk. 

Many auto brokers are former salespeople and dealership managers. They know how to negotiate the lowest possible price with local dealers because they understand exactly how much money the dealer will make from manufacturer rebates, extras, and warranties.

An auto broker can help you find the best deals and save you time and frustration. You could work the deal out yourself, but you might be missing out on bigger discounts and the best prices. 

Further, you won't have to spend a day or two at a dealership haggling over a car. Instead, the auto broker can do all the hard work on your behalf and even drop off the car along with the completed contract for you to sign in less time than you could have worked it out yourself. 

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What Kinds of Cars Can Auto Brokers Find? 

Auto brokers can help you find a specific vehicle you want to purchase. They might have access to more vehicles than a local dealership, which has already stocked its lot with limited choices. The kinds of cars an auto broker can help you find may include any of the following:

• New cars: This is the most popular assignment auto brokers take on. One of the great advantages of new car brokering services is that they can usually get you the specific color, upholstery, and factory-installed features you want on the model you like. Dealerships often charge extra for these services or claim that the automobile you want is impossible to find in the color or specifications you have in mind, simply because they don't carry it themselves.
• Used cars: Used car brokering is less common than new car buying services, but can be even more useful. The dealer margin on used car pricing tends to be wider than new car pricing, which leaves more room for a good used car broker to find you an amazing deal. Another advantage is that used car brokers often charge only a percentage of the amount they save you on the deal. That means they work hard to get the best price possible. Both you and the broker benefit from these deals.
• Car leases: Leasing is more confusing than buying for many shoppers. The vague terms and minute details of the leasing contract include hundreds of opportunities for you to spend more than necessary. Many auto broker companies offer leasing services for a flat fee to help you feel confident that you're getting the best price possible on your new car lease. Some leasing agents receive kickbacks from the dealership. This may cause a conflict of interest in the negotiation process, so you might want to search for an agent who receives compensation directly from the clients, not the dealership.

Whether you want to buy a new or used vehicle or start a lease on a car, an auto broker can assist you with finding exactly what you're looking for.

How to Find the Right Auto Broker 

You might find that the convenience of avoiding the sales lot is enough to make a car broker's fee worthwhile. If that's your goal, a free service through your warehouse club store or credit union might be a great fit for you.

However, if you want the deepest discount possible and top-notch services, you may need to do some homework. Ask around and look for the following qualities in a car-buying agent:

• Works for a low flat fee of around $200 to $1,000, depending on the quality of the car
• Or, receives a percentage of savings under MSRP
• Doesn't take kickbacks or payment from the dealership
• Offers services such as delivery, trade-in brokering, and customization options

A good auto broker can also be of great help after you have worked the price down to an affordable level. Many car brokers charge a lower fee for the task of finishing a deal you start. The agent will work to get the price lower, if possible, and take care of the final negotiations regarding financing, dealer-installed extras, and warranties. You can typically expect to pay a retainer of about $100 if you work with a car broker. 

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Why Work with an Independent Insurance Agent? 

Just as an independent auto broker can get you better deals than a dealership's broker can, an independent insurance agent can usually get you better car insurance premiums than an insurance agent who works for one carrier. 

Independent insurance agents work with multiple car insurance companies and can help you choose the one that offers the best coverage and value for your needs. And down the road, your agent will still be there to help you update your coverage when necessary or even file car insurance claims for you.