Characters Welcome... But No Brokers
By Phil Villegas
For a few select franchises, the desirability of some of their most popular models will often attract a cast of characters looking to get their hands on one of these hot cars…the characters we are warning you about are not customers, but rather brokers.
There are brokers and individuals who make a living of sourcing hard to obtain popular models only to flip these vehicles to another customer for a profit. Often, these vehicles can end up being exported and end up costing the dealer chargebacks on incentives by the manufacturer and potential loss of vehicle allocation on that and other popular models. Time and time again we have seen where dealer sales management has engaged in transaction activity with brokers and time and time again we find the gross profit on these sales are well below traditional profitability margins.
The vast majority of broker related transactions are short sighted and have limited benefits to the dealer. Besides carrying a low profit margin, these then have limited, if any, F&I products and the vehicles will likely never see any service work from the dealership since these then go out of the market, not to mention the incentive chargeback risk.
So why would a dealer want to engage in business where they are not directly dealing with the end customer? The answer is most dealers won’t, but their sales people and management will. See, most sales personnel and their management are often “short-term focused”, very rarely looking beyond the current month and are not typically concerned with any department other than their own. Broker transactions are essentially a lay-up, no customers to deal with, no banking approvals and limited time on their end…not to mention any indirect side perks they may be receiving from brokers that are not disclosed at the store.
We’ve had several clients embrace a “no-broker” or “no-pass through” environment where they are requiring direct contact with the end customer. This approach significantly reduces any less than appropriate behavior from outsiders and more importantly from people on the inside.