Sunday, January 13, 2008

SHOULD YOU BUY A CAR THROUGH A BROKER?

If you aren’t familiar with car brokers, they are third parties [mostly individuals but some companies] who act as an intermediary between you and the car dealer, supposedly to get you a better price than you would be able to obtain by yourself.

Most dealerships, including mine, deal with brokers. Virtually all brokers are paid a fee by the dealer and some also charge the customer…a “double dip” you might say. The fee the brokers charge range all over the map. I don’t remember paying a broker less than $500 and have paid up to $5,000. The charges to the customers range from $250 to $750. If the broker is charging you a fee, you can be almost certain he is also charging the dealer at least as large a fee.

Another way brokers do business is to actually buy the car and then sell it again to you. To do this they must have a dealer license; otherwise they would have to pay sales tax on the transaction. Buying the car allows them to mark the car up to you as their compensation. They may charge you a fee too.

As you can see, the price of going through a broker raises the price of the car that you buy. The only question is does it raise the price above what you could buy the car directly? The answer to this question depends entirely on your buying skills. If you are of average intelligence and follow the advice that I’ve given in these columns, you should be able to buy most cars at as low a price as a broker can. This means you will save anywhere from $500 to $5,500 in fees that you don’t have to pay. I don’t care what a broker may tell you, a dealer will always sell you the car at just as low a price as he charges a broker…if you are a skilled buyer and do your homework.

Of course there are reasons other than price that car buyers seek out brokers. As I’ve often said, buying a car can be a very unpleasant experience. One of my columns is entitled, “Should I Buy a Car or Have a Colonoscopy?” If you go about buying a car the right way, you minimize the unpleasantness. Don’t ever go into a dealership without doing your homework about the exact year, make, and model you want, accessorized exactly as you wish. Always get at least three competitive prices. If at all possible do your shopping in the comfort of your home on the Internet. If you’re not cyber savvy, ask for help from a friend, son or daughter, or grandchild who is. You will get your best price on the Internet without ever having to leave the comfort of your home. Two excellent Web sites you can consult are www.kbb.com and www.edmunds.com. They have vast amounts of free information on dealer cost, quality ratings, trade in values, etc.

A lot of people rely on their credit unions for advice on which dealer they should buy a car from. It sounds like a good idea because your credit union handles thousands of these transactions and has experience with lots of car dealers. I must warn you that there are employees in credit unions who are paid by the car dealers for referrals…not any different than a broker’s fee. Also many credit unions sell extended warranties on cars that they finance and they may refer you to dealers who agree not to offer to sell you their extended warranty. This is a potential conflict of interest. I advise you to get at least three competitive prices from three dealers, including the one that your credit union referred you too.

If you are accustomed to going through a broker to buy your cars, I suggest that on your next purchase that you also get prices directly from two other dealers. Compare those prices with your broker’s price and be sure you don’t pay him his fee unless you buy the car through him.

21 comments:

  1. Recommend using a dealership other than Earl Stewart Toyota. Can't get appointments, left on hold for long periods of time, service takes forever. Service in the past was much better. Have several friends that have purchased there and also feel service has declined substantially. We have found more reliable service and treatment at
    Delray Beach Toyota, Stuart Toyota.

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  2. OK, Mr. Anonymous, I won't be able to respond to all of your postings which you are leaving on all of my different articles.

    You are an employee of another car dalership with lots of time on his hands...business not so good?

    Your complaint about my service department being so busy that you can't get an appointment, having to wait, left on hold too long remind me of this old joke.

    "I know a restaurant that is so busy that nobody goes there to eat anymore!"

    If I'm wrong and you really are a past customer, just come out of the closet and identify yourself. Don't hide under your cloak of anonymity or nobody will believe you including me.

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  3. you like to cover up the fact that if anyone has a bad experience at your dealership and chooses to use the "anonymous" posting, then they must be a dealership employee. Not true! Not true at all! You are not the best dealership to do business with and your service department is going down hill. Believe what you want, but I am not a dealership employee and I choose not to let you know who I am. You have all of my information at your dealership and I choose not to be harassed by you or your company.

    Thank you

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  4. OK, "Mr. Anonymous",

    I'll take you at your word that you aren't an employee of my competition but you simply had a bad experience at my dealership's service department.

    If this is true, why won't you call me and describe your problem so that I can resolve it for you? You don't even have to disclose your identity since you have expressed fear of being "harassed" by me and my employees. You can choose to disclose your identity only once I have assured you that I will resolve your problem.

    Regarding your allegation that "my service department is going down hill", I can only respond that my service volume has grown faster than any other Toyota service department in South Florida for the last four years and I have the highest service customer retention percentage in South Florida...this means that a higher percentage of Toyota owners RETURN to my service department than any other Toyota service department in South Florida.

    Does that sound like a service department going down hill?

    When you respond that I'm lying about the above accomplishments, I will be happy to furnish you, or anyone, documentation. I will also go on record to promise that, If I cannot" I'll donate $10,000 to your favorite charity.

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  5. A word of advice: there is no way to win in a fight against anonymous online trolls. One person with a keyboard and too much time on his hands can appear like an army of disgruntled, poo-flinging monkeys.

    I'm distrustful of all marketing, especially when promises of excellent service are made. I've bought one car from you, had it serviced there a few times and haven't had a bad experience yet. Your service is living up to the hype.

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  6. Thanks for your comment about "Anonymous online trolls".

    I couldn't have put it better. Many of these jerks are salesman or higer that work for my competitors and many of them I choose not to respond too.

    Most of them reveal themselves for what they are without my having to comment.

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  7. As I have done on my other blog postings, I have deleted comments that contain vulgar language or references. I welcome opposing points of view especially when they assume the form of rage-filled attacks (they have no IDEA how well they make my points for me).

    Let's just keep it clean :)

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  8. Dear Mr. Stewart: Can you steer me to take the appropriate action against a dealer that I had remove the dealer fee from my contract only to put it back on the leasing papers when the car I ordered came in. He said he "lost" his copy of the contract and accused me of altering mine. He finally said that he would "split the difference" with me or he would cancel the deal. I had to agree since I was turning in my old car. Any way you cut it, he ripped me off for $400. Thank you in advance for any help. Please respond to "bruceoreileen@aol.com".

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  9. Dear Bruce and Eileen,

    I'm very sorry to hear about your bad experience with the Dealer Fee.

    I always advise those with a complaint against a dealer to attempt first to speak to the owner or General Manager [The General Manager for the whole dealership, not General Sales Manager who is often misrepresented as the General Manager].

    If this doesn't work, here are 5 numbers I mentioned on my last Saturday radio talk show on Seaview AM 960. You can listen online in the morning 9-10 every Saturday and stream it from www.SeaViewAM960.com. The numbers are listed in order of the best to the worst.

    The Florida Department of Motor Vehicles: 850 617-2000. They can suspend or revoke a dealer's license to do business.

    Florida Attorney General: 866 966-7226. They can assess fines of $10,000 and more and bring criminal charges.

    Auto Manufacturer: Obtain the 800 "help line" from the auto manufacturer. You can always find this online. They will notify the dealer and require a response. This will get the dealer's attention because manufacturers are very interested in customer satisfaction.

    County Office of Consumer Affairs: The number in West Palm Beach is 888 852-7362 and every county in Florida has an office. Not too effective but better than the BBB.

    Better Business Bureau: The West Palm Beach number is 561 842-1918. I listed this last because it is the least effective. The BBB is funded by businesses which is like leaving the "fox in charge of the hen house".

    It sound like you also have a strong legal case, but I always recommend a lawyer as a last resort. The reason I think you have a strong legal case is that you still have the document which showed the Dealer Fee removed. It should be clear to an expert in court whether the document was modified as the dealer alleges.

    Good luck and please let me and our blog readers know how you make out.

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  10. From Bruce & Eileen: I took your advice and started with the car manufacturer. I communicated my complaint to the lady on the other end of the phone. She asked what I would like that would satisfy me. I said that I would like my $400 back. She said that all dealers were independent and that my complaint would be communicated internally within the company. She gave me the name of the owner of the dealership but no contact number. I think I would have a better chance of getting through to the President than him, but I will give it a try anyway. She gave me the feeling that I just wasted my time. I'll wait a short time and if nothing transpires I will call the attorney general's office.

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  11. Dear Bruce and Eileen,

    Congratulations on being persistent. It will pay off but unfortunately few car-buyers have your tenacity.

    Please keep us informed on this because your actions and experience are a valuable role model for Florida car buyers.

    I'll be very interested in your success with Bill McCollum, the Florida Attorney General.

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  12. From Bruce & Eileen: Just writing to say that I haven't forgotten you and to update you. This dealer is one of many owned by the same party so I left a message on their website explaining my problem. I heard back nothing so I called and got the name of the man who oversees their dealerships. I just now wrote to him and will keep you informed if or when I get a response.

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  13. From Bruce & Eileen: Well fasten your seatbelts because you are not going to believe what I am telling you now. I found out that this dealer cannot lower the dealer fee even $1. They must charge every customer the same fee or it becomes discriminatory. That's why they lowered the car price $400, not the fee. It seems that the dealer fee has become the least of my problems. The leasing company has a "pull ahead program" which will forgive the last three payments of my old lease if I lease another car with them. That's what I did when I leased the car in question. Along with crossing off the dealer fee on my contract, the dealer wrote "Pull ahead program on delivery". Well guess what, The dealer is not taking care of these payments and now the leasing company is coming after me for $1324.55. The dealer is now "circling the wagons" saying that I chose some other incentive plan other than the pull ahead which is of course nonsense. I never got a response to the letter I sent to the parent company either. I wrote a letter to the leasing company stating that when they told me to lease another car and they would forgive my last three payments, they in essence altered my lease and they should go after the dealer for the money & I would be glad to have a judge hear my complaint & would abide by his decision. I am waiting to see if they ignore my letter also. If they do, my next step is the attorney general. You know, I am so angry, I don't even care about the money anymore. I just want this dealer to PAY for what they are putting me through.

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  14. Dear Bruce and Eileen,

    I'm very sorry to learn of your second tier of deceit with this dealer...first the dealer fee and now the "pull ahead program".

    You are very intelligent, tenacious consumers and, I have little doubt, will prevail...albeit with lots of time and aggravation. This unethcial car dealer has met his match and you are going about it in exactly the correct manner.

    You "got it in writing" [the subject of one of my columns on this blog] when the dealer wrote "pull ahead program on delivery". This should preclude the dealer's claim that you opted for an alternative form of incentive.

    You have done exactly the right thing by writing the leasing company, the car manufacturer, and the owner of the dealership before resorting to the Florida Attorney General, Department of Motor Vehicles (DMV), or hiring a lawyer. One suggestion is to resend these letters "certified return receipt requested", if you have not already done so. This prevents the addressee from claiming they "never received your letter" and these letters will be valuable evidence if you have to resort to more serious measures.

    One additional weapon you might choose to use is "publicity". You have politely chosen not to mention this dealership's name or location on this blog. No business wants to be revealed for unethical or illegal business practices. Or, you may want to contact your local newspaper or TV station. For example, Daniel Vasquez is the consumer reporter for the Ft. Lauderdale Sun Sentinel and Shannon Cake is the reporter for WPTV's "Contact 5", a consumer advocate show.

    Thanks very much for sharing the details of your struggle against this unethical car dealer. Your experience is very valuable to the readers of this blog. Many will learn from it and hopefully avoid a similar experience.

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  15. From Bruce & Eileen: I guess it's time for an update. Your friend Mr. McCollum passed the buck. He said that this was a consumer complaint and gave me a list of agencies to contact. However, I had somewhat better luck with DMV. They called me and said that they have already fined the dealership for inappropriate record keeping (loosing my contract, etc.)and are waiting for a response from them on another part of my complaint. I just hope that the fines levied will amount to alot more than they stole from me. On an encouraging note, I have not heard from the finance company in over six weeks regarding the certified letter I sent them. From them, no news is good news.

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  16. From Bruce & Eileen: The final chapter(I think?). The DMV has closed its investigation. During it I kept getting checks from the dealer totalling about $250. It turns out that they overcharged me for registration & title fees and didn't return the excess. They were found in violation of three statutes: 1-failure to keep records of purchases & sales. 2-Failure to refund overpayment of registration fees. 3-Failure to refund overpayment of title fees. Isn't it strange how one misdeed can lead to others being uncovered? They wrote a letter to the DMV saying "we are very sorry and promise not to do it again". As far as not honoring my contract, the DMV said that that is a civil matter and they have no jurisdiction over it. You can't win them all. I think it's logical to assume that if they are overcharging me, they are overcharging alot of other people. I don't understand why the DMV didn't examine other sales to determine this. On a lighter note; I recently checked my credit report and found that the leasing company has marked my lease "paid and closed". I don't know whether they got the money from the dealer or my letter to them was pursuasive enough to have them see things my way. At least they did the right thing and I will consider using them again. I am sure this dealer now wishes that they never heard of me. Maybe now they will think twice before mistreating another customer(but I doubt it). I know your dying to know who this dealer is. I was reluctant to say while the complaint was open, but now that it is closed and they have been found with violations I can say that it is Napleton's Auto Park on Northlake Blvd. Thank you for your advice and your interest in my case.

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  17. Hi Earl---I am looking at a few cars--do you think it's better to actually go through a broker or go to the dealer? Seems the broker I contacted is less cheaper. I also have about a grand owing on my lease. The broker I contacted seems to be able to get that waive where the dealers I contacted want to roll it in to my payment. Enjoy your you tube videos. Thank you. Megan from Michigan

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  18. Dear anonymous, some brokers do a good job, especially for those who are not skilled in negotiating or who don't follow my advice in this blog. Brokers all charge a fee and these fees can range from $500 to $5,000. The dealer pays the fee to the broker, but the dealer then passes this fee along to you in the price of the car. The broker who told you that he can get the dealer to waive the $1,000 owed in your current lease is lying to you. The dealer will likely tell you the same thing but they are paying the leasing company the $1,000 and adding that to price of the car you buy or lease from them. I advise you to try www.TrueCar.com. They charge dealers a $299 fee which the dealer does pass along to you, but TrueCar will save you a lot more than $299 with the good price they will give you.

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  19. Earl--thanks for the info. What the broker told me was because my 2012 GMC Terrian is a highly valued vehicle, and what it is worth, would wipe out the 1,000 since they will make it up on the person they sell it to. Also, are the dealers doing the same thing with what they call "Pull Ahead Leases" where they supposedly waive the last 3 payments on the lease or up to $1800.00? Finally, I live in the Detroit MI area where all the auto companies are based. I can get what they call a "Supplier Discount" which also supposedly gives you employee pricing or just a bit under. Is that all a scam as well? I have several cousins, and other family members who work for either GM Ford or Chrysler and supposedly these discounts do save you money. Again, love your You Tube Videos. Thank you very much for your assistance, Earl. Megan from Michigan

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  20. Dear anonymous, your broker is not being honest with you. If your 2012 GMC Terian has a high current market value, greater than $1,000 over the lease residual, you should be the benefactor, not the car dealer. You should exercise your lease option to buy your leased car for the residual and then "flip" the car back to the dealer at the higher actual market price. "Pull ahead" lease deals are legitimate if they are offered by the manufacturer, but not the dealer. The manufacturer will often really waive a number of lease payments to get you to lease another vehicle. If the dealer designs this offer, he's simply marking up the next lease to cover paying off your remaining lease payments. Your supplier discount offered by the manufacturer is real and a good deal. Just be sure that the dealer does not add phony charges like doc fees or dealer prep charges.

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  21. Thank you Earl for being an advocate for the consumer! Megan from Michigan

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