Created on Friday, 08 April 2011
Auto brokers often claim special arrangements and exaggerated savings on new vehicle purchases. Don't believe them!
First, a car buying service or broker is a for-profit business that purports to work on behalf of consumers who are interested in buying new vehicles. In exchange of a payment to them, these businesses claim to have special insider information about new vehicle invoicing costs, and expertise about the car buying process, which isn't available to the general public.
This is disingenuous and dishonest. Dealer invoice costs are available online. (The new car industry is unique amongst retailers; many consumers feel at liberty to know the wholesale cost of an automobile, so they can use that information advantageously in transacting a price on a new vehicle).
Brokers want you to believe that dealing directly with a dealership is so complex that consumers aren't capable of finalizing a purchase without the assistance of a "paid" third party. Yet at the same time, these self-appointed experts have no qualms in seeking an extra referral fee from dealers in addition to the sum already charged to the consumer.
Secondly, and key, is that car buying services (and almost all brokers) avoid regulation, via the Ontario Motor Vehicle Dealers Act, by refusing to register with the Ontario Motor Vehicle Industry Council (OMVIC). Therefore, no regulating body governs their business activities. Fictitious claims about their services are seldom challenged.
In Ontario, all new car dealers (including their sales staff) must be registered with OMVIC, an independent body that manages and regulates the business practices of registered car dealerships (new and used) across the province.
OMVIC administers the Motor Vehicle Dealers Act, which sets out strict rules and regulations governing the trade of motor vehicles in Ontario. When those rules are broken, severe penalties result.
Thirdly, the amount of money that brokers claim they can save consumers is a myth. Last fall, one such company's website proclaimed that several hundred members had saved between $500 and $7,000 on a 2010 Toyota Siena. The company made identical claims in newspaper ads.
As a Toyota dealer, I knew the claim was false. There wasn't $7,000 dealer profit on a new 2010 Toyota Sienna. For a customer to save that much, a franchised dealer would need to sell this vehicle at a substantial loss.
That $7,000 figure came from a well-publicized, but limited time, manufacturer program that was available to anyone who purchased the vehicle. All Toyota dealers in Ontario would have informed buyers of this program. Needless to say, this broker had not voluntarily registered with OMVIC, and thus is not governed by its advertising guidelines.
Claims using other makes and models, which purportedly "save the purchaser" huge sums, were also false and misleading.
True dealer markup on most vehicles sold in Canada averages less than 10 percent. Depending on model and availability, most final transaction prices on popular cars yield profit to the dealer of less than six percent, before deducting selling expenses.
Getting a "good deal" on a vehicle is something that appeals to everyone. A good deal is one that is a "fair deal" for both the buyer and seller. This holds true for any retail purchase – good value for the purchaser and a reasonable profit for the retailer.
When buying a new car in this province, everyone involved in the sale that receives any form of compensation must be registered with OMVIC. That is the law! If you do business with a broker, exercise caution; uninformed consumers often discover that they were misled, only after paying a fee.
To check for registered and OMVIC-compliant dealers, visit www.omvic.on.ca, and search under "dealers and salespersons."