What an auto broker does (and how brokers get paid)
An auto broker is a licensed go-between who finds the car you want, gets dealers to compete for your deal, negotiates it and handles the paperwork, while the car itself is still sold or leased through a dealer. Brokers are paid by a fee from you, a fee from the selling dealer, or both.
What an auto broker does
A broker finds the car and negotiates the deal. A dealer still sells or leases it.
Firstyou say what you want
Sourcing
- Make, model, trim, color and the options you can't live without
- For a lease, the term and your miles a year
- The broker finds matching cars in dealer stock or on the way
Thenthe same car, several dealers
Competing quotes
- Several dealers quote the same car
- You compare like with like, not a loaded trim against a base one
Nextthe numbers
Negotiation
- The selling price, the fees and the add-ons
- On a lease: capitalized cost, money factor, amount due at signing
- The residual comes from the lender, so it is checked, not negotiated
Lastcontract and keys
Paperwork and delivery
- The selling dealer still writes the contract
- The broker makes sure it matches what was agreed, line by line
- A licensed broker can deliver the car if the dealer approves in writing
A broker doesn't own the car or decide your credit: a dealer sells or leases you the car, and a lender approves the contract.
Key takeaways
In California a broker must hold a DMV dealer license with an autobroker's endorsement, and it has to tell you in writing how it gets paid.
What an auto broker does
You tell the broker what you want: make, model, trim, color, the options you can't live without and, for a lease, the term and how many miles you drive a year. From there, a good broker runs the search and the negotiation from your side of the table.
Sourcing. The broker finds matching cars in dealer stock or on the way, so you aren't calling store after store.
Competing quotes. Several dealers quote the same car, so you compare like with like instead of a loaded trim against a base one.
Negotiation. The broker works the selling price, the fees and the add-ons and, on a lease, the numbers that set the payment: the capitalized cost, the money factor and the amount due at signing. The residual value comes from the lender, so a broker checks it rather than negotiates it.
Paperwork. The selling dealer still writes the contract. The broker's job is to make sure it matches what was agreed, line by line.
Delivery. California law lets a licensed broker deliver the car and collect your signature on the dealer's contract, as long as the selling dealer approves in writing.
California law uses "autobroker" and "auto buying service" for the same kind of business, so a car buying service is a broker too. A lease broker is simply a broker who mostly arranges leases. What a broker doesn't do is own the car or decide your credit: a dealer sells or leases you the car, and a lender approves the contract.
How auto brokers get paid
There is no single industry fee. The arrangements you'll run into fall into three groups:
A fee you pay. Often a flat fee agreed up front, sometimes one that varies with the car or the amount of work.
A fee the selling dealer pays. Some dealers pay brokers for bringing them a buyer. That money comes out of the deal somewhere, so a broker who charges you nothing isn't automatically the cheaper route.
Both. A fee from you and compensation from the dealer on the same deal.
California doesn't leave this to guesswork. As soon as practicable, the broker must tell both you and the selling dealer whether it gets any fee or other compensation from that dealer, and the dollar amount of any fee you owe it, and it has to confirm both in the brokering agreement. The agreement must also state, in bold type, either that the broker receives a fee from the selling dealer or that it doesn't.
The fee on its own tells you little. What matters is the total. On a lease, add up every monthly payment, the amount due at signing, every fee and the broker's fee, then compare that with your best dealer quote for the same car, term and miles. How to read a lease quote walks through each line, and the Check my quote tool flags add-ons and extra fees in a dealer's quote.
How auto brokers get paid
Three ways a broker gets paid. California makes it tell you which, in writing.
A fee you pay
Often a flat fee agreed up front, sometimes one that varies with the car or the amount of work.
A fee the dealer pays
Some dealers pay brokers for bringing them a buyer. That money comes out of the deal somewhere.
Watch fora broker who charges you nothing isn't automatically the cheaper route
Both
A fee from you and compensation from the dealer on the same deal.
There is no single industry fee. What matters is the total: every monthly payment, the amount due at signing, every fee and the broker's fee.
Auto broker licensing in California
California treats a broker as a kind of dealer. The Vehicle Code defines an autobroker, or auto buying service, as a dealer that brokers, meaning it arranges, negotiates or helps complete the purchase of a new or used vehicle it doesn't own, for a fee paid in any form or at any time. That brings a set of rules with it:
A dealer license plus an endorsement. A broker needs a DMV vehicle dealer license with an autobroker's endorsement on it. The endorsement is cancelled automatically if the dealer license is suspended, revoked, surrendered or expires.
A DMV log of every deal. The broker must record each brokered sale (the car's VIN, the agreement date, the selling dealer and the buyer) in a log that belongs to the DMV and can be inspected at any time.
Your money goes into trust. Purchase money, deposits included, has to go straight into a trust account at a regulated bank, savings and loan or credit union. The broker can only use it to pay the selling dealer for your car or to make refunds.
No playing both sides. A broker can't be the seller and the broker in the same transaction.
No prices in broker ads. A broker's advertising can't show a car's price or payment terms, has to say the advertiser is an autobroker, and must state that new cars are subject to price and availability from the selling franchised dealer. That's one reason you won't find monthly payments in a licensed California broker's ads.
Brokering without a DMV license is illegal; the DMV calls unlicensed dealers and brokers curbstoners. It investigates complaints about unlicensed operators and about licensed dealers and brokers that break the rules.
Your rights in a California brokering agreement
The broker has to give you a completed written brokering agreement before you sign a purchase contract for the car, or before it accepts more than a small amount of money from you, whichever comes first. The agreement must include:
the broker's name, address, license number and phone number;
a full description of the car: make, model, model year, color and options;
the purchase price, the date the agreement expires if no dealer contract is presented, and any fee you'll owe the broker;
the bold statement on whether the broker gets a fee from the selling dealer;
a boxed notice of your cancellation and refund rights, which also tells you to contact a DMV investigator if you can't resolve a dispute.
Those rights have teeth. You can cancel and get all your money back, brokerage fee included, if the final price is higher than the price in the agreement, if the car delivered isn't the one described, or if the agreement expires before you're shown a dealer contract at or below that price. A purchase deposit can't be more than 2.5 percent of the vehicle's price, and you can have it back on demand any time before you sign the dealer's purchase agreement and take delivery. Before taking any money, the broker must also tell you that you'll get a full refund if it doesn't get you the car or doesn't provide the service it promised.
One caveat: the statute is written around purchase contracts. If you're leasing, ask for the same things in writing anyway: the price, the fee, who pays the broker and what happens if the deal changes.
Is an auto broker worth it?
A broker tends to earn its fee when:
You know the car you want and would rather not spend days visiting dealers.
The car is hard to find in the trim or color you want, or local dealers are adding markups.
You're leasing, because a lease has more numbers than a purchase, and each one can be padded.
You want dealers competing on the exact same car rather than on similar ones.
A broker adds less when you enjoy negotiating and have the time, when a dealer you trust already gives you strong pricing, or when the fee is bigger than the savings once you compare totals. For the two routes side by side, see car broker vs dealership.
What to check before you hire an auto broker
The license. Look the business up in the DMV's Occupational License Lookup under Vehicle Dealer, and check that the license number matches the one on the brokering agreement.
The written agreement. Don't hand over real money until you have it, with the price, the expiration date and the fee filled in.
Who pays the broker. Ask how the broker is paid on your deal, including whether the selling dealer pays it.
The deposit. Keep it within the legal cap, pay the business rather than an individual, and ask where it's held.
A complete quote. For a lease that means capitalized cost, money factor, residual, term, miles, due at signing, taxes and every fee, in writing, before you commit. How to negotiate a car lease shows what a clean deal looks like.
The selling dealer. Ask which dealer will sell or lease you the car and sign the contract.
How 021 helps
021 Auto Leasing is a California-licensed auto broker (license #82402) for leases, financing or cash purchases on any make and model: we find the car, get several dealers to quote the same car, negotiate the whole deal and deliver it, and you pay only once you have the keys. Before you agree to anything, you get one written quote with the payment, drive-off, term, miles, taxes, fees and 021's fee. Tell us the car you want, or send us a quote you already have.
Before you hire an auto broker
Six things to check first.
A California broker needs a DMV dealer license with an autobroker's endorsement.
- The licenseLook it up in the DMV's Occupational License Lookup. The number should match the brokering agreement.
- The written agreementHave it before you hand over real money, with the price, the expiration date and the fee filled in.
- Who pays the brokerAsk how the broker is paid on your deal, including whether the selling dealer pays it.
- The depositKeep it within the legal cap of 2.5 percent of the price, pay the business and ask where it's held.
- A complete quoteFor a lease: capitalized cost, money factor, residual, term, miles, due at signing, taxes and every fee.
- The selling dealerAsk which dealer will sell or lease you the car and sign the contract.
Common questions
How much do auto brokers usually charge?
Is it worth using a broker to buy or lease a car?
Are car brokers legal in California?
How do I find a trustworthy car broker?
Can you use a broker to lease a car?
021 Auto Leasing is a licensed California autobroker (license #82402). All new cars arranged for sale are subject to price and availability from the selling franchised new car dealer.