“Car salesman” is synonymous in the minds of many car buyers with “I’m going to deplete my bank account.” For good reason: car salesmen often seem to be highly trained in the art of separating buyers from their money. But in recent years, a process known as auto brokering has taken hold, at least in some parts of the retail car buying industry. It has not yet become wide-spread, but with the economic crisis that began in early 2008, more consumers sat up and began to take notice of vehicle brokering.
What is Auto Brokering?
At its most basic level, auto brokering is the practice of acting as a “go-between” for a retail consumer car buyer. The auto broker is given a type of vehicle that the buyer wishes to purchase–or simply a set of guidelines–and the broker goes out and finds the vehicle.
The auto broker is not limited to the franchise car dealerships, which tend to be more expensive, but searches other avenues such as:
- Rental Returns
- Lease Trade-Ins
More prominent examples of auto brokers are CarsDirect, MyNextMotor, CarSmith Motors, and others. It should be noted that most auto brokers are local, rather than national, which means that any web search for an auto broker should be preceded by the name of the city where the buyer is located (i.e., [city] auto broker).
Where Do the Vehicles Originate?
Repossessions come from financial institutions such as banks and credit unions. These institutions hold liens on the vehicles. When the owner of the vehicle who has financed the loan defaults, the financial institutions repossesses the vehicle. At that point, the institution usually wants to get rid of the vehicle as soon as possible.
Rental returns come from rental companies such as Avis, Budget Rent-a-Car, Hertz, or local rental companies. When a vehicle is considered no longer a good property to rent out, the company sells it off.
Lease trade-ins are vehicles which are nearing or have completed the end of their lease contracts.
Any type of vehicle may be found at auction, including repossessions, returns, or lease trade-ins.
Pros and Cons of Auto Brokers
Auto brokers tend to work one-on-one with car buyers, seeking specific automobiles for their clients. In exchange, the buyer must pay the auto broker a flat fee. Often, this fee is paid up-front.
Pros of Auto Brokering
- Individual service.
- Flat fee more transparent than hidden charges often found at franchise dealerships.
- Searches avenues (auctions, etc.) that ordinary car-buyers don’t know about or have access to.
Cons of Auto Brokering
- Auto brokering not legally regulated in most states.
- Up-front fee may or may not be returnable if car buyer not happy with the vehicle the broker has obtained.
- Buyers usually unable to test drive vehicles before purchase.