Concerned dealers and industry watchdogs say car brokers and the legal gray area they operate in hurt the industry in multiple ways. Putting it plainly, car brokers help arrange deals between auto buyers and licensed dealers for a fee.
But critics say brokers these days operate unlawfully, ultimately hurting business, damaging brands, and creating a market where some dealers are forced to do deals with brokers to meet difficult-to-hit sales targets.
Lacking regulations and/or enforcement, along with manufacturers that don’t police their own policies have helped fuel an increase in brokering in recent years. Legislation and legality varies state to state.
In New York, for example, car brokering is legal, but heavily regulated.
Driving the news: In New Jersey, regulations prohibit the practice, but some dealers and groups have ramped up action to make sure existing regulations are enforced.
Including The New Jersey Coalition of Automotive Retailers (NJ Car). Laura Perrotta became president of NJ Car in November 2024. She said many dealers have raised the issue.
“The dealers that I've spoken to would love for brokering to go away, and that it just shouldn't exist from their perspective,” Perrotta said in an interview.
Regulations that cover brokering took effect in June 2024 in Jersey.
But New Jersey Gov. Mikie Sherrill just took office in January and her new motor vehicle commissioner – the body tasked with enforcing such regulations – hasn’t been confirmed yet, Perrotta said.
So the group is practicing patience and hopes to give the issue new light once the new players are in place.
Paul Sansone, owner of Sansone Jr. Auto Group, owns five dealerships in central New Jersey: two selling Nissan, two selling Kia, and one that sells Mitsubishi.
Sansone told CDG News that the brokering problem is out of hand in his market area.
For context: Brokering originated decades ago. In the best cases, it is used to help ease language or other barriers that may make a customer worry about negotiating their own deal.
Now, Sansone said, some dealers get up to 30, 40, even 50 percent of their deals from brokers.
Brokers who do not go through the rigorous, pricey steps to become an actual licensed dealer have no responsibility to anyone after a deal, not the consumer, the dealer, or the manufacturer.
Many act and advertise as if they are licensed car dealers, including advertising inventory online as if it were their own.
CDG News researched several broker sites with addresses listed in either New York or New Jersey, requesting an agent to call back for comment on the story. Five ignored the notes, and one requested contact information, but did not connect.
The New Jersey Motor Vehicle Commission did not respond to a request for information about enforcing regulations.
OUTSMART THE CAR MARKET IN 5 MINUTES A WEEK
Get insights trusted by 55,000+ car dealers. Free, fast, and built for automotive leaders.
Nuts and bolts: Aggressive incentive programs add to the issue. Tom DeFelice III, who practiced law for seven years before returning to the family business of auto retail, is dealer principal and general counsel at Circle Motor Group in New Jersey.
He’s also the NextGen chairman and sits on the executive committee for NJ Car.
He explained the dangerous cycle dealers can fall into while trying to meet sales goals through brokering.
Let’s say a dealer must sell 100 cars a month to get an incentive. But they can’t hit that, so a broker brings them business that requires selling the cars for less money, sometimes at a loss, just to make the sale. And then they earn even more inventory to sell, and a vicious cycle is born.
“It’s often described as a drug,” DeFelice said. “Once you start, you kind of can't stop, because you've put yourself in the really difficult position that if you ever turned it off, now you're just completely drowning in inventory, and you don't have a customer base to get rid of it.”
Manufacturers’ role: Although brokering spans manufacturers, Nissan came up often as an OEM that puts hard-to-reach sales targets in place.
Perrotta confirmed that NJ Car advocated on behalf of dealers who contacted Nissan about brokering concerns.
Nissan declined to comment on the story.
Other side: Some say brokering has a place in some instances and can help a deal go more smoothly for whatever reason a customer may have for not wanting to do the deal themselves.
But that slim slice of positive is overshadowed by reality, critics say.
And, customers can get misled by brokers. Often, a customer can get the same deal in the store.
Not to mention that, unlike with a dealership sale, there’s usually no ongoing relationship or protection for buyers who use a broker.
Because the prevalence differs by region, there are different schools of thought about curbing it, eradicating it, and regulating it.
Regional answers: Diverse populations help fuel broker activity in the Northeast, but again, efforts to regulate brokering differ by state. In New York, the choice was: If we can’t stop it, regulate it.
Mark Schienberg has been president of the Greater New York Automobile Dealers Association for 40 years.
He said brokering has evolved into a high-dollar, loosely regulated system fueled by manufacturer sales pressures and cross-border economics, and while it may provide some consumer value, it requires stronger guardrails to prevent harm to franchise dealers, consumers, and the state economy.
His group helped lobby for changes to broker laws that went into effect in December 2024.
Brokers in New York now must have a physical address, for instance, and they must have a contract with the customer.
Brokers now can only earn fees from one side: Either the dealer or the customer, not both.
“Regulations for the broker business are really needed,” Schienberg said. “You have a role, but it has to be within these boundaries. And that’s the big takeaway for this whole thing.”
Zooming out: Fixing the issue seems just as complex as defining it.
Some say manufacturers can erase it completely by eliminating incentive programs – Schienberg pointed out that brokering nearly screeched to a halt during the pandemic. Others say simply enforcing policies in place can help curb it.
And lastly, continuing to educate the public about the reality of franchise dealers will help, too.
That includes explaining to customers all that dealers do, from investing in communities to advocating for consumers as needed.
“[Dealers] want to have a long-term relationship, so they're going to go to bat for you, whether it's warranty work or a recall repair that they'll do free of charge,” Perrotta said. “...The average person in the auto market doesn't know all the things that the dealer is doing for them…”
A quick word from our partner
Grow your business with the #1 online retailer
List your inventory on the Amazon Autos marketplace, where purchase-ready customers can browse, buy online, then pick up at your dealership.
Visit autos.amazon.com to learn how you can fuel your business and deliver an experience customers already know and love with Amazon Autos.
