Car broker versus dealer

Your Guide To Understanding Brokers And Dealers

Individuals or companies looking to buy, sell or lease vehicles can choose between hiring a broker or dealing directly with a dealer to get these services.

‍Car brokers and car dealers operate differently but may have some similarities and interdependence, making many people use these terms interchangeably to mean the same thing. To set the record straight, a car broker is not a car dealer.

This article highlights similarities and differences between these two options of buying, selling, and leasing cars, as well as useful information to help you make the right choice. 

Is A Car Broker The Same As A Car Dealer?

A car broker may be the same as a car dealer in some aspects, and they may even work together sometimes, but they are not exactly the same. Let's see how similar or different a car broker and dealer are.

Similarities Between Brokers And Dealers

Services offered

Both car brokers and dealers provide the following services:

• Car leasing to individuals and other entities

• Deals on new and used cars from an extensive network of manufacturers, dealerships, and sales subsidiaries

• A range of car financing and insurance services from top lenders and insurance companies

• Trade-in deals

• Competitive prices on cars from private sellers 

Car sourcing and affiliation 

Car brokers and dealers can be independent or have an extensive network of car sources hence providing customers with a wide selection of cars to choose from when buying or leasing from them. 

Mode of operation 

Car brokers and dealers have:

• An online presence

• Physical offices 

Stamp duty payment 

Whether you choose to buy your car from a dealer or through a broker, you will have to pay stamp duty. Rates of vehicle stamp duty differ across Australia. You can use an online stamp duty calculator on your state's Department of Transport website to find out how much duty you need to pay in your state.

What Are The Differences?

Definition

Car or auto brokers are individual car sales professionals or companies that offer car buying, selling, and leasing services on behalf of private parties or other dealerships at a commission.

A car dealer operates a retail business venture that buys, sells, and leases cars. They have new car contracts with automakers or automaker sales subsidiaries and purchase used vehicles wholesale from auctioneers, private sellers, or brokers and mark the car up for retail.

Car sourcing 

Car brokers have partnered with dealers and manufacturers who they match with private entities or companies that want to buy vehicles. They source vehicles from these affiliate partners only when a buyer has contacted them.

Car dealers source new vehicles from manufacturers or buy used cars from the public and display them in their showrooms. They do not go looking around when they are contacted because they have existing stock.

Car inventory ownership 

Car brokers do not actually own any inventory themselves but rather work with multiple sources to find you the vehicle that fits your needs at the best price possible. Car dealers own physical showrooms where they display vehicles, and they sell from their inventories. 

Car pricing

Car brokers earn a commission, and their worth depends on the type of vehicle you want to buy and whether it is a new or used vehicle. A broker’s fee is high if you want a used car because finding the right one takes more time and energy than finding a new one. Car dealers mark up the vehicles they have availed for sale and therefore earn profits.

Depending on the circumstances, there can be overhead costs such as administration fees that lead to an inflation of the price of the car you intend to purchase.

Car financing 

A car broker acts as a middleman between you and a finance house. They do not provide you with the loan directly but instead help you source from their network of lenders.

Car brokers can link you to a finance house as well as provide car finance indirectly if you have a bad credit standing and cannot get a direct loan from lenders. 

Choosing Between A Car Broker And A Car Dealer 

When you are looking to lease or buy a car, it can be challenging to decide whether to deal directly with a dealership or hire a broker. There are just as many good reasons to buy a car from a dealer as using a broker to help you find the car you want.

In most instances, the benefits you want to get and the pitfalls you want to avoid will determine which option you will go for. Consider working with a broker if you do not have so much time in your hands and are looking for guidance throughout your car buying process.

However, if you believe in your car buying knowledge and are looking for a more straightforward traditional way to purchase your car, a dealership is the way to go. Whichever way you want to go, there are essential aspects of a car buying process that you must consider. It is challenging to tell which option will get you a better deal as this entirely depends on your situation. Generally, when deciding between the two options, you should consider the following:

Cost

Find out which option will get you your dream car at a competitive price. Of course, you will want to avoid unnecessary overhead costs that would inflate the price. Do your research and go for the option that will save you money. Also, evaluate if you are a good negotiator who can deal directly with the dealership or need a middleman's help to get the best price. 

Convenience 

You do not want your car buying process to be a hassle. Know what amount of time you are willing to spend searching and negotiating for the car model you are looking for. Buying a car from a dealership may be faster than using a broker who spends time looking around.

When you go to a dealership, you can drive home in your new car the same day because even the paperwork is completed there and then. You must, however, establish what you are willing to compromise: time, money, or both. You do not get all these together, whichever way you choose to buy your car.

Reliability

Go for the option that will get you the car you want when you want it. You also want to avoid getting scammed, so you must establish the reputation of dealers and brokers in your locality. In most cases, it is the brokers who have a bad reputation. 

Availability of car financing

If you do not have enough money to purchase the car model you want, choose the option that will link you to a finance house. Both car dealers and brokers have access to an extensive network of financial institutions and lenders. Dealerships offer both direct and indirect car loans, while brokers only link you to lenders and help you to apply for car financing. 

Benefits Of Using A Car Broker Over A Dealer

• A customer does not deal directly with the car owner when buying through a broker. Car brokers represent you throughout the car-buying process, including finding your preferred car model, negotiating, doing paperwork, and delivering your car. This gives you peace of mind, unlike if you have to deal directly with a car dealer.

• Car brokers are expert negotiators, and hiring them will save you time and money. They will get you a car of your choice at the lowest price than if you negotiated directly with the dealership. This is explicitly true if you decide to hire an independent broker to undertake the car buying process for you.

• Brokers have extensive knowledge about buying cars, and they understand the market dynamics very well. They can easily acquire your dream car as they are flexible to search at many car dealerships.

• Brokers have access to a more significant number of finance houses than dealerships. When you combine this with their flexibility, they are able to look around for the best car financing deal available for you.

• You have an opportunity to choose from a wide variety of vehicles if you are buying through a broker. Unlike dealerships that limit your choices, independent brokers use their extensive network of manufacturers to find you the right car for your needs.

Benefits Of Using A Car Dealer Over A Broker 

• In Australia, dealerships can offer car loans to their customers without holding an Australian credit license. Therefore, if you have bad credit and you cannot get a direct car loan from financial institutions, a dealership can secure your car finance through an indirect loan from their extensive network of financial institutions and other lenders.

• Car dealers offer fleet prices for the purchase of multiple vehicles by selling you each car at a discounted price.

• You can pay for a car from a dealer in multiple ways including cash, financing, and even hire purchase.

• There is no good experience like walking through fancy showrooms displaying the latest car models. This is not something you get when you are buying through a broker.

Who Best Suits Your Needs?

While there is an overlap in services provided by car brokers and dealers, they have a few distinct differences. Their advantages over the others are, however, very subjective, making it difficult to rank them.

In most instances, the option you choose will depend on your unique needs. You may decide to capitalise on the flexibility, expertise, and independence of a broker if you do not have time to devote to the car buying process. If you are an avid negotiator, you can deal directly with the dealership.