When I wrote about “Car Dealers’ Tricks — and How to Dodge Them” in June, a number of readers were curious about my mention of using a car broker to purchase a car. I like using brokers because they reduce the hassle and uncertainty of car buying.
To learn more about what car brokers do, I called my broker, Patrick Schallert of The Autoline, and interviewed him. He’s been a broker for 26 years. As a former car dealership owner, he knows the business inside and out and works to negotiate the best deal for his clients. Because he works on a flat fee ($200 for cars under $50,000 and $250 for cars over $50,000), he really is the buyer’s agent (unlike a real estate broker, who gets a cut of the sale price of the house and therefore doesn’t have much incentive to get the price down for you).
Here’s what he had to say:
Mark: Describe what a car broker does.
Patrick Schallert: I act on behalf of the buyer. I’m the agent to make sure they don’t fall prey to these dealerships. If they ever get it right I’ll be out of business, and I’ve been saying that for 26 years now.
Mark: How hard is it for the average person to walk into a dealership and get a fair deal on a car?
Patrick: I can’t understand why people just walk into dealerships. It depends on the dealer, but really, they’re so well-versed at what they do, and people know nothing about it. Their sales force is intensely trained to get every dollar out of the consumer that they possibly can. Even if you get a great price over the phone, once you come in they’ll wear you down, and you could spend hundreds or thousands of dollars more than if you found a good broker who takes care of it for you.
Mark: What are some of the advantages of using a broker?
Patrick: One of the biggest things about a broker is that we deliver off-site. The contract is done and signed before the car leaves the floor. So nothing can change. They can’t get out to your house or your work and say, “I’m going to sell you paint protection or an alarm system that you don’t really need.” I protect you from all that stuff. That’s what we do.
Mark: I really appreciated that part of using a broker. The car was delivered to my driveway; the papers were filled out completely and with the price you negotiated for me. I’ve bought cars the old way, where there’s that guy at the end, the one with the pinky ring, who tries to sell me clear coat and under-body spray and all that, and it’s an uncomfortable situation.
Patrick: That guy who is sitting across the desk from you there is the highest-paid employee at the dealership. A good F-and-I (Finance and Insurance) guy makes more than a general manager sometimes. It’s amazing what kind of money they make. They take away everything that’s been given to you. They work on a strong commission schedule and they are very well compensated for what they do.
Mark: If someone wants to buy a car without using a broker’s services, how should they go about it?
Patrick: Load your gun. You need to understand lease rates, bank shopping, the dealers’ buy rates, the cost of their money, and all that stuff. If you’re really diligent you could do it, but any good broker would know all of that stuff. Negotiate the price down and then don’t buy anything — don’t buy their alarms, or paint protection or Lojak — that’s all additional dealer profit. There are plenty of places that you can get those things online if you really want them.
The problem [with buying a car on your own] is you don’t know what the dealerships are getting back [from the manufacturer]. For instance, Mercedes Benz sometimes gets 10-12 thousand dollars per car, depending on which car it is, and I understand that on their high-end S-Class car they’re getting 20-25 thousand dollars back from the factory now, under cost! So if you go in there and they say “We’ll make you a great deal — we’ll sell this car to you for ten thousand dollars under cost,” you’re thinking you’re getting a great deal, but any good broker knows they’re getting twenty or twenty-five thousand back.
Mark: What do you do about getting rid of your old car? Trade it in or sell it yourself?
Patrick: I never recommend trading it into a dealership. Say you are going in for a new Mercedes and trading in a Lexus. The chances are pretty good that they’re not going to keep that car. They’re going to call a wholesaler or their buddy at a Lexus store in the used car department and say, “Hey, I’ve got a Lexus. What will you give me for it?” They’ll take a couple of thousand dollars in that exchange, and give you a price. If you’ve got a beautiful Lexus to trade in, take it to a Lexus store. Or sell it on Craigslist if you want even more money for it. Check what your competition is, do your homework, call a couple of people that are advertising their cars and say, “Hey, what kind of luck are you having?” And then stick it on Craigslist. You’ll get thousands more than trading it in.
(Please note that, while I’m pleased with the brokerage services I’ve received from The Autoline, this interview should not be construed as an endorsement. If you’re interested in using a car broker, please do your research and choose one that works for you.)