Two northeast auto retailers say unchecked car brokering cuts into profits and market shares.
Dealers Paul Sansone Jr. and Jake Lebowitz are friendly direct competitors.
But on this they agree.
“It’s decimating the dealer profitability, certainly in the northeast, in our region, specifically,” Sansone told Daily Dealer Live host Sam D’Arc.
Rewind: CDG News did a simplified overview on the complex issue of car brokering, which varies in legality by state.
Industry experts said the dense, diverse populations of the northeast help fuel its prominence there.
Some critics say certain manufacturers and related incentive plans make car brokering problematic.
Many critics wish it would just go away. Others say it’s a needed service.
And some at least want more accountability and enforcement of existing regulations, including Sansone and Lebowitz.
By the numbers: Both spoke to their experiences with Nissan, which Sansone noted did try to trim back some of its incentive programs to help curb brokering.
Sansone explained the math that can make it “financially feasible” for some dealers who often lose $3,000 to $7,000 on a broker deal.
If a dealer sold five cars at a $3,000 loss, but “earned $1,000 a car on the other 85 cars to hit a certain sales objective, the math is in your favor,” Sansone said.
Sansone estimated that brokers influence up to 80 percent of some dealers’ sales outside their primary market areas (PMAs).
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Unlicensed actions: Lebowitz pointed out how difficult it is to become a licensed New Jersey dealer. Meanwhile, many brokers often behave and advertise as if they are licensed dealers without the investments.
Lebowitz thinks many customers are ill-advised and don’t realize the risk or that using a broker for a deal ultimately adds cost or sidesteps regulations or both.
“Your local dealer owns the real estate,” Lebowitz said. “They have millions invested in the community, right? They sponsor Little League. The broker rents an office for $3,000 a month, and they could be in Bermuda next month.”
Misleading ads: Brokers also don’t have to play by the rules in advertising, Lebowitz said.
He’s had customers come in with offers advertised by brokers that would be a $10,000 loss for him.
“It distorts the consumer's perception of what is actually available in your market,” Liebowitz said.
Regulators: Sansone said enforcing the rules, both manufacturers and the legal bodies with the authority to do so, could help curb brokering in a major way.
Both men have been active in working with local dealer bodies to address the concerns and make changes.
“Let's just enforce the policies that are on the books,” Sansone said.
Necessary service: Some readers shared reasons why brokering is needed.
The practice is legal in some states, including New York, which passed new guidelines on the practice last year.
“Primarily [brokering] comes into play when clients want more personal service and pricing up front, as well as finding difficult sought-after vehicles outside of their PMA dealers,” Dan Dixon wrote.
An unnamed commenter who said they are a broker said it’s often about saving money and convenience.
The takeaway: Sansone and Lebowitz say it isn’t about competition, but rather, making sure that competition is fair. Allowing unregulated brokering to go unchecked will ultimately hurt the dealer model, they say.
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