You might have used a mortgage broker, so why not enlist a car broker to help you find a new set of wheels?
Historically, car brokers haven’t been a big thing in Australia and have been more of an American thing. However, with our busy lives and the general nightmare that is talking to a car dealer, car brokers are popping up everywhere. They can be incredibly useful. But are they right for you? Below we’ll explain the general car broking process and how it fits in with the whole purchasing process.
What is a car broker?
A car broker is a person who buys cars for their clients. Like a mortgage broker, a car broker acts as the middle man between the vendor, and the buyer.
A purported perk of car brokers is they are professional negotiators, and may be able to secure bulk-buy or fleet discounts. They can also save you the hassle of having to walk into a dealership like a lamb to the slaughter - they do the whole negotiation process for you.
Similarly, it could also help to think of a car broker as the big man (or woman) on campus. They often don’t just deal with car dealerships, not at all. They often have their inner friendship circle of financiers, insurers, wholesale dealers and more. So, they could be your oracle for the whole car buying process.
When do I enlist a car broker?
In Australia, you typically enlist a car broker when you’ve narrowed down the car and model you want, and typically after you’ve test driven the vehicle. Your broker liaises with their rounds of dealers to find and negotiate a good price on the car. Some brokers may offer car-finding services as an extra feature, as well as:
Organising test drives
Financing options (they could have a preferred finance provider)
Insurance (again, they may do deals with particular insurers)
Salary packing services
So if you’re fresh to the car buying service, a car broker may be able to help you out, but typically a car broker’s core business is to engage with the dealership. Often it’s still up to you to do the legwork and find the actual car you want.
Do car brokers charge a fee?
While in many cases there is no direct fee, you may find there is a built-in fee to the price you pay on the car. As a broker has direct relationships with dealers, they typically charge the dealership a commission, which then passes on that cost to you. A typical cost could be anywhere from around $150, all the way to around $1,000 if it’s an expensive car.
Will a car broker get me a good price?
A car broker usually has relationships with multiple dealerships, and is essentially a professional negotiator. Being that they negotiate on so many cars, dealerships may pass on cheaper prices to the broker. This could result in a cheaper car than if you tried to bargain a dealer down yourself, but not a guarantee. As mentioned, the broker's cut may be built into the purchase price. This cut can vary from broker to broker.
There are also other things your broker may be able to secure - other than price - that sweetens the deal. These sweeteners could include:
A paint upgrade
…and numerous other bonuses. This could be more likely to happen at the budget end of the spectrum, where dealers might not necessarily move on price, but can throw in extras.
What about trade-ins?
Like negotiating for your new ride, the broker can also put feelers out among his/her dealership or wholesale buddies and obtain an offer on your trade-in vehicle. Usually there are limits with this, such as maximum age or mileage of the vehicle. Separating the trade-in from the new car purchase could also be used as a tactic so the dealership can’t use it as leverage by offering you a lower rate on the trade-in.
If you’ve secured the services of a broker and you’ve found the car you want at a price you’re happy to pay, your next steps might be to organise insurance and/or finance the vehicle if you don’t have the cash upfront. You will need to organise these yourself if you don’t go for the broker’s or dealership’s options.
Insurance is usually just a case of getting a quote either online or over the phone and going from there, with the policy starting on the day you drive the car off the lot, in case you careen into a telephone pole.
Financing the vehicle is usually a case of choosing either an unsecured (personal) or secured loan - an unsecured loan usually attracts a higher interest rate, but the car isn’t used as collateral - with a secured loan it’s the opposite. You may also be able to get pre-approved for a loan amount, so you’re not walking around blindly with Ferrari tastes and a Toyota budget.
Looking for a low-rate fixed car loan for a new car? Below are some of the lowest rates in the market.
Data accurate as at 17 March 2020. Rates based on a loan of $30,000 for a five-year loan term. Products sorted by advertised rate, then by company name (A-Z). View disclaimer.
Savings.com.au's two cents
Car brokers definitely serve their place in the market, but you’ll have to do your homework to see if they are right for you. They can often act as the go-to person for all your car buying needs - often a frustrating process at the best of times. Brokers can simplify the process, and are essentially professional negotiators.
However, there are some key points to keep in mind:
The service isn’t exactly ‘free’ - the broker charges commission to the dealer, which is often passed on to the sale price.
Brokers don’t eliminate the whole process - often you’ll still have to have at least some knowledge of the car you want before enlisting their help.
A broker’s negotiating performance may also be harder to judge, and you may be left wondering if you could have done a better job negotiating yourself. Still, they are a convenience that could be worth ‘paying’ for but it’s up to you to decide.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states.
In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
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