What is An Auto Broker?

A guide to using a car buying broker
A woman sitting inside a car while her auto broker explains its features.

According to Edmunds, more car buyers than ever choose to purchase vehicles through auto brokers. But is a professional car-buying agent worth the money when you could broker your own deal at the dealership?

In most cases, it depends on what you want to buy, whether that be a new car, a used car or a lease. It also depends on how much you know about the finer details of car buying and how much time you are willing to spend haggling at the dealership. Also, you should always make sure you're covered with an affordable car insurance policy. 

The final consideration is cost. But if you hire an auto broker that is worth its salt, the price of its services will seem minuscule compared to the thousands of dollars you save on the deal.

Types of Auto Brokers

Car Broker/Auto Broker:

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

Club or Bank Car-Buying Service:

  • Service provided for free or small charge by your bank, credit union, AAA or Costco
  • 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 minimum cost

Car-Buying Concierge:

  • Charges a flat fee, depending on value of vehicle
  • Works in customer’s best interest, not dealership's
  • Often offers delivery, signing and trade-in services

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 of them are former salespeople and dealership managers. They know how to wring the lowest possible price out of local dealers because they understand exactly how much money the dealer will make from manufacturer rebates, extras and warranties.

You could work the deal out yourself, but you might be missing out on bigger discounts. Sometimes, the savings you forego could be worth thousands of dollars. The level of expertise you need to get the best deals may not be something you can learn in a weekend. 

Car broker Patrick Schallert explained in an interview, "You need to understand lease rates, bank shopping, the dealers’ buy rates, the cost of their money ... If you’re really diligent you could do it, but any good broker would know all of that stuff."

A good auto broker can also save you time and frustration. Most buyers spend at least 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 price down to perhaps $500 above invoice, you move on to the finance and insurance office. 

This is where good deals often go bad, according to Schallert. The F&I agent is paid very well to make back the money given to you in a discounted price by hiking insurance rates, playing with the cost of extras and warranties, and overcharging for insurance. An auto broker can do all of the hard work on your behalf and often drop off the car along with the completed contract for you to sign in less time than you could have worked it out yourself. Auto brokers can help you find any of the following:

  • New cars: This is the most popular assignment auto brokers take. 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 known than new car buying services, but it 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 profit from an amazing deal.
  • Car leases: Leasing is more confusing than buying for many shoppers. The vague terms and tiny 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 are 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 may want to find an agent who receives compensation directly from the clients, not from the dealership.

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Find the Right Auto Broker for Your Deal

According to MSN Auto, many people find that the convenience of avoiding the sales lot is enough to make a car broker's fee worthwhile. If that is all you need, a free service through your warehouse club store or credit union might be perfectly satisfactory. 

However, if you want the deepest discount possible, along with top-notch services, you may need to do a little homework. MSN Auto advises that you ask around and look out for the following qualities in a car-buying agent:

  • Works for a low flat fee of around $200 to 1000, 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.

Leave Insurance to the Experts

The dealership's financing and insurance office is one of the worst places to get a good price on auto insurance. An auto broker who is looking out for your best interests can almost always do better. But you might want to tap other sources for the best deal on insurance. 

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

If the auto broker you hire doesn't specialize in insurance shopping, you can talk with a local, independent insurance agent. These agents work for you, rather than the insurance provider, to get you the best deal possible on your car coverage. Our independent agents are ready to help you.

Take Your Keys and Hit the Road

Once you have safely parked the car you ordered in your driveway and you have signed and finalized all the paperwork, you can get back to your daily life. Hopefully, you've saved days of stress and hassle and spent far less than you saved on the final price tag. This is the best part – when you get to brag to your friends and maybe a consumer website or two about what an easy, awesome deal you just made on your new car.

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