A hassle-free way to buy a car
Published by the Globe and Mail, December 22, 2009, Written by Monique Savin
December 22, 2009 - Jane Shaw had no idea that she could love the car-buying process. She had three weeks left on her lease and her previous experiences in dealerships was leaving her feeling anxious.
But it was while she was running from dealer to dealer looking to replace her 2006 Volvo XC70 that a personal vehicle-shopping service came to her attention.
"I heard about auto brokers from a friend who felt she wasn't getting the best deal at a dealership. I don't have time for negotiation and I'm not interested in spending hours educating myself on how to get the best deal. My friend saved between $7,000 and $8,000 off the list price dealing through them," says Shaw, a director of marketing for Nike Canada.
Auto brokers like Auto Mall Network are finding that what consumers experience - and don't experience - in the car buying process is crucial for everyone, from students to CFOs.
"We're so conditioned as consumers to comparison shop and play off another, but the car business is where you can negotiate on retail price," says Viraf Baliwalla, a broker with Auto Mall Network. In a family situation, 85 per cent of the decision on cars is made by women, yet they leave negotiating up to men to minimize haggling. But the family still isn't getting the best possible price, he says.
"What are the odds of your husband outsmarting that sales manager?" asks Baliwalla, who routinely attends remote auctions from his office in Toronto to find new or used cars for time-pressed clients.
An auto broker can be a helpful tool. They offer four services: providing consultation on finding a car according to budget, sourcing vehicles in Canada or the US, negotiating with the dealer on the car invoice, and arranging delivery. Some brokers offer additional services, including car valet and maintenance.
For those services, Auto Mall Network charges a flat fee of $350 for new cars and $799 for used cars, which includes vehicle identification number history and comprehensive inspection by mechanics before clients take possession. For cars imported from the U.S., $1,500 covers co-ordination to get the car across the border.
"The flat structure is what we feel is a fair value for our service. We don't charge a percentage of the car cost because then our compensation goes up the higher the price, which would be a conflict of interest," Baliwalla says.
Because brokers don't operate a car lot, they buy vehicles as needed instead of stocking up on cars and carrying a heavy debt-load for inventory. With low overhead, brokers can offer competitive pricing. As well, brokers keep track of dealer incentives and rebates, and because brokers have access to the same new cars, dealers have compelling reasons to put only their best prices upfront.
Shaw started by researching cars online and gave her shopping list and price range to a broker. "I went online and looked at manufacturers' suggested retail prices," she says. "Shopping on the web definitely influenced my decision this time."
In helping the broker to match her criteria, Shaw first completed an online form. "I told them what some dealerships offered and I'm feeling that with hidden costs there's room to move," says Ms. Shaw, who says the entire transaction was done via e-mail. Next, the broker consulted with her to decide where he should look. For new cars he'll phone local dealers. Or he'll log-on to Adesa, an auto auction website, to learn the prices at which dealers are buying cars across Canada. The broker gets a history of cars sold in the past 45 days.
Then, he identified cars that match Shaw's list with price quotes from multiple dealers. "For new cars, an auto broker can put you into a vehicle in as little as a few hours. You can go to the dealership to pick it up in a day, if it's in stock. Used cars take a few days to few weeks," says Baliwalla.
Traditionally, here's where the haggling between Shaw and the sales manager would have begun. But because her broker armed her with insider knowledge, he cut through the haggling in getting Shaw's car at close to invoice price. "I felt totally supported and in control," she says.
Shaw made the deal without having ever met Baliwalla or a sales manager. The only time she stepped into a dealership was for the fun stuff: the test drives and to collect the vehicle.
Finally, her agent sealed the deal on her behalf and had the paper work ready at the dealership, where Shaw picked up her new car: a metallic black 2010 Volvo XC60 with tan interior.
The advantage of a broker is that it can save you from spending hours of homework and be less expensive than if you were to negotiate yourself. The disadvantage is giving up control, says analyst Dennis DesRosiers. "The secret to saving money is that you have to have time to educate yourself, and then it doesn't matter whether you use a broker or dealer, but by abdicating time and information, you regulate yourself to paying more," says the president of DesRosiers Automotive Consultants.
However, consumers don't stand a chance if they lack insider information, according to George Iny, national director of the Automotive Protection Association, a non-profit consumer interest organization. "With the right car, plus the right promotion, you can save $2,000 - and no one but a dealer or broker could tell you about those deals," he says.
He says a broker is more sophisticated at negotiating. Where a broker can't get close to dealer invoice prices is on small cars like Honda Fit or Toyota Yaris, vehicles with thin margins. High-end vehicles have a larger margin and brokers can do a lot for consumers.
Although dealerships have a vested interest in providing a high-level of service and keeping customers satisfied, that's not what buyers experience, and if there is a deal to be made, it's not made by the sales manager, Iny says.
When Shaw hired an auto broker, price wasn't entirely the issue. She couldn't spend time shopping around and didn't want to feel vulnerable when negotiating at a disadvantage. She came out miles ahead than if she had shopped and haggled on her own. "I ended up saving thousands of dollars and it was definitely worth spending $350. The broker took away the pressure you feel when doing business with a dealership directly. I will use them again."
Five tips for getting the most from an auto broker
- Hire a broker through the Automobile Protection Association. For an annual fee of $65, APA members receive five quotes; each includes dealer invoice, APA's negotiated mark-up over invoice, incentives and a referral to a broker and a dealer who guarantees to sell or lease you the vehicle at the best price.
- Search online to verify word-of-mouth recommendations. While your friends might have had a pain-free experience and brag about bags of cash a broker saved them, other car buyers who used the same services may offer valuable stories online at car club forums, where comments are insightful and candid.
- Ask the brokerage company to offer a best price guarantee. Should you find a better deal than the one presented by your car agent, a guarantee renders the service agreement void, leaving your options opens.
- Interview a car broker in person or via telephone. By personally engaging with a potential broker, you can assess his or her knowledge and attentiveness, as well as ask how much negotiation experience he or she has, to explain how a deal will be made, and if the broker will be paid from dealerships in exchange for referrals.
- Pay a flat rate. It's important that your savings don't affect the broker's compensation. Unlike real estate agents, a car broker's fixed, no-haggle-fee structure enables you to pay based on the service, not a percentage of the car's ultimate sale price.