Car broker compensation

car broker compensationHow are car brokers compensated? Well, there are a couple of methods that can be employed (and a third, illegal option sometimes used by unethical, unregistered brokers). The car broker can either be compensated by the client who has commissioned them to assist with their vehicle search, or they can be compensated by the dealership that is selling the vehicle. Car brokers cannot, however, legally be compensated by both their client and the selling dealership. This is highly illegal in Ontario and absolutely prohibited by law. But that doesn’t mean all brokers play by the rules!

Car brokers that collect from the selling dealership may offer what appears to be a “free” service to their client, but in reality their fee is still being paid for by the client; just in a round-about way. The car broker’s fee comes from the vehicle’s negotiable profit margin – an amount that could have otherwise been passed forward to you as savings. For example, if a broker negotiates a potential discount of $3,000 on a vehicle with the selling dealer, they could pocket $2,000 paid directly to them by the selling dealer allowing you to realize only $1,000 of negotiated savings. And it’s possible you’d never know how much you’ve actually paid for their services!

Those that are compensated directly by their clients (provided they’re not double-dipping!) should be acting on behalf of their client rather than as a commissioned salesperson on behalf of the selling dealership. I personally find this the more appropriate way to ensure consumers’ best interests are looked after. But of course, not all brokers are created equal.

Remember to perform your own due diligence to ensure you’re commissioning an OMVIC-registered and regulated auto broker who will not double-dip by collecting from both you and the selling dealer. Use OMVIC’s online search tool or call OMVIC (800-943-6002) to check if the broker is indeed registered – don’t just take the broker’s word for it or believe their website! It’s your hard-earned money, so ensure you’re not unwittingly giving it away! Be sure you’re hiring a registered broker operating within the confines of the law.

As always, I’m available to help with your vehicle needs. Don’t hesitate to get in touch!

Angus McComb

CarCompass.ca

416-477-9328 or toll-free at 855-STEER-ME

 

Admin fees, etching and Nitrogen – are these fees legal?

I’ve come across a lot of discussion recently from disgruntled car shoppers regarding dealer-added fees and extras such as admin fees, theft recovery etching / stickers like Globali, and nitrogen filled tires. Consumers are often surprised when they are about to purchase a vehicle only to find hundreds (or even thousands) of dollars of extra fees tacked on to the selling price. And understandably they are not too happy about it! Without properly understanding what these fees are or if they’re even legal, you could end up paying much more than necessary. So being informed and well-equipped before going to buy a vehicle is essential.

If you’ve ever looked at a vehicle’s bill of sale, you’ve likely seen fees for line items described as “admin fees”, “theft recovery etching”, “freight”, “PDI”, “nitrogen filled tires” etc. These charges aren’t necessarily illegal, but they can be. Due to ambiguity and a general lack of transparency regarding extra fees and “value added” extras (I use quotation marks as not all consumers will perceive added value), I’m going to share my understanding of the subject in hopes of helping others understand their rights as consumers and what the dealer can and cannot charge.

First and foremost, I’m not a lawyer and this is not legal advice. I’m just sharing information based solely on my understanding of various laws and my experiences as a car broker.

The first piece of powerful information to be aware of: “all-in pricing laws”. Per the Ontario Motor Vehicle Industry Council (OMVIC – the regulatory body responsible for administering and enforcing automotive law within Ontario) and the MVDA 2002 (Motor Vehicle Dealers Act, 2002 – the automotive legislation OMVIC enforces), if a dealer is advertising a unique vehicle with its own VIN (vehicle identification number) at a specific price, the price stated must be the all-in price except for HST and licensing if the ad illustrates this in a clear and comprehensible manner (e.g. “price excludes HST and licensing”). This means any and all charges associated with selling the vehicle must be built into the advertised price, including freight, inspection charges, safety inspection and emissions testing (unless there is a disclosure stating the vehicle is being sold “unfit” or “as-is”), and any administration fees, other fees, levies and HST. So, if you’re looking through Trader.ca or a similar vehicle listing source and a price is advertised by the selling dealer, by law it should be the all-in price, save perhaps HST and licensing if clearly specified. But be aware if the price you’re looking at is in an ad attempting to sell a specific unit within a dealer’s inventory, or if the ad is simply promoting a make and model and listing the MSRP. If it’s just a generic manufacturer ad promoting a make and model, the stated base MSRP may not accurately reflect a dealer’s current inventory which may have value added extras already equipped (more on this in the next paragraph). But if you’ve done your homework, you won’t be surprised by any extra fees.

The next powerful piece of info? Being aware of “coercive” or “tied” selling. To my knowledge, our consumer protection laws cover coercive or tied selling: the act of tying one good or service to the sale of another. You cannot be told you must buy product or service X in order to obtain product or service Y. This is an illegal practice. So, it’s at this point we need to be clear about what constitutes tied selling and what does not. If a dealer already has a vehicle within their inventory and they’ve chosen to equip it with something like theft recovery etching, they have every right to price the extras accordingly and as they see fit (as long as it’s built into the advertised price). This is a value added option they’ve elected to install, much in the same way they could with other value added options like larger wheels, window tinting, a better sound system etc. and raise the asking price accordingly. And consumers have every right not to purchase that vehicle! However, if you’re placing an order for a new vehicle that will be factory built specifically for you, the dealer cannot tell you that something like theft recovery etching is mandatory, as this would constitute tied selling. The same would be true for a vehicle within inventory that you know does not currently have value added extras already equipped. Basically, it is tied selling if the value added extra is not yet installed but you are being told you must purchase it; and it is not tied selling if the vehicle already has the value added extra installed prior to you placing a deposit and/or signing a bill of sale. In either case, the advertised price must be inclusive of all of all fees and extras. You cannot be presented with unexpected extra fees at the time of sale.

So, the big distinction is: “is the vehicle already equipped with the value added extra, or not? If it’s not, you cannot be told it’s mandatory to pay for the extra. But if the dealer has already fitted the vehicle with value added extras, they can ask for more money accordingly. Odds are, if you’re going to walk away from a deal over a few hundred dollars, they’ll likely reduce or waive the fee altogether. If you feel they’re breaking all-in pricing laws or utilising tied selling, mention this to them and let them know that you intend to report the incident to OMVIC – this can be very persuasive!

Unfortunately, not every dealer is ethical, operating legally, or in compliance with all-in pricing laws or the MVDA 2002. A phone call to the selling dealer before going to see the vehicle in the flesh can prevent you from wasting your time if the advertised price is not inclusive or if their inventory already has undesirable or expensive value added options installed you do not want. And if the dealer isn’t registered with OMVIC, don’t set foot in the dealership as they’re operating illegally. The same goes for car brokers like me – we must be registered with OMVIC. Any business operating in the automotive industry within Ontario that deals with consumers must be registered with OMVIC, by law. This includes dealership salespersons, too. Don’t just trust the dealer’s or car broker’s website that they’re registered with OMVIC – call OMVIC or use their online search tool (and pay particular attention to the “status” of their registration within your search results) to ensure the dealer or car broker is indeed currently registered and operating legally. There are reasons (forty-five thousand reasons to be exact) you should want to deal exclusively with legally operating OMVIC registered dealers and brokers, but perhaps I’ll get into that in more detail in a future post.

As for nitrogen filled tires, their benefit for consumer application is dubious at best, as the air around us is about 78% nitrogen anyway! So is it worth paying for nitrogen filled tires? Well, do you believe the party responsible for filling the tires with nitrogen has managed to create a complete vacuum within the tire and successfully voided it so pure nitrogen can be pumped into the tire? I’m not so sure, and even if they could I doubt the alleged benefits warrant the price. If you drive on properly inflated tires you’ll be just fine.

I hope this helps clarify dealer added fees and value added extras. I’m always available to assist with your vehicle purchase and to help you attain the lowest possible price. Feel free to leave a comment or question below and I’ll do my best to help!

Angus McComb

Owner, Car Compass. 416-477-9328 or toll-free at 855-STEER-ME

Top 10 tips for buying a used car

Originally posted on Wheels
By: Mark Toljagic

There’s no St. Lucius, Patron Saint of Loose Tie Rods, looking out for you.

Finding a great second-hand vehicle shouldn’t be a matter of good luck or even divine intervention.

There’s an abundance of used cars and trucks in the GTA — Toronto has one of the highest concentrations of automobile dealers in North America — so scoring a good one is not an insurmountable task.

It just takes a bit of homework and some patience to locate the right model at a reasonable price. No good comes from rushing into things. Follow these steps and you’re bound to end up with a good experience and an even better vehicle.

Research your purchase

The proliferation of automotive websites that offer professional reviews and post owners’ experiences is a helpful trend, and an excellent way of gaining insight into the second-hand models you’re contemplating. Online forums frequently discuss reliability concerns, things like jerky transmissions and short-lived air conditioners. New-car reviews rarely mention these issues, but many owners aren’t shy about spilling the beans. Look for any angry buzz online regarding your model before you step on the car lot. If nothing else, documented problems can help you negotiate a lower price.

Shop the less popular brands

Everyone knows the leading brands that command premium second-hand prices. But why surrender to these unkind market forces? There are other, lesser-known competitors that for a variety of reasons didn’t sell well — models that can give you similar quality and features for less dough. Automakers such as Suzuki, Mitsubishi and Kia made some very good models that were undersold and overlooked. Keep an open mind rather than fixate on one model. Knowledgeable bargain hunters familiarize themselves with all of the segment models and are often rewarded with a great vehicle for a considerably lower price than the big-selling brands.

Word of mouth

Don’t underestimate the value of letting your friends and colleagues know you’re looking for a used car. Someone always has an elderly aunt who wants to sell her mint-condition Buick Lucerne to the right buyer. If you’re not picky, these often make the best deals, since sellers may not know the exact market value of their vehicle, or may not be motivated to go through the tedious rigmarole of prepping their vehicle for sale. That’s not to say these sellers are ripe for the picking — some may harbour unrealistic notions of what their car is worth, unaware of the precipitous depreciation than can ravage their net worth.

Have a budget in mind

It’s smart to know how much money you can spend on your next car. What is your trade-in worth? Unless your present ride is a recent model, chances are the dealer will be wholesaling it to another retailer, and the wholesale value is all you’re going to get. Consider selling your present car privately. With a bit of spit and polish you may get a couple thousand dollars more than the dealer would give you. That money can go a long way in helping you leverage your next automobile purchase. Having cash in your pocket gives you the upper hand when it’s time to negotiate.

Dealer or private sale?

New-car dealers are the best source for late-model used cars, since they have first dibs on lease returns and trade-ins. Notoriously fickle (and expensive), they’ll send anything dubious or with high mileage to a wholesaler or to auction. Independent lots buy their inventory at auction, which can be a hodge-podge of good and bad. If the price is low, chances are it’s had an accident repair. Private sales are the wild card: you could get a dud from a curbsider (who sells multiple vehicles posing as a private seller) or a creampuff from someone who was insulted by the dealer’s lowball offer on his trade-in.

Take a close look

Used cars are like snowflakes: no two are exactly the same, so scrutinize each one carefully. Look for paint overspray on door seals, mufflers and wheel-well liners — a sure sign of collision repairs. You may find shattered glass fragments under the seats. A mildew smell indicates a stubborn water leak. Fresh undercoating may be masking recent structural repairs. Lit warning lamps may be a portent of expensive engine repairs. Motor oil that resembles a frothy milkshake often means there’s a blown head gasket or worse. The transmission fluid should be bright red or reddish brown; any darker and there may be problems.

Drive it like you own it

Rather than a five-minute spin around the block, tell your sales rep you’re going to be on the road for a good 45 minutes. It’s usually enough time to take the vehicle on the highway as well as on some potholed roads where you can test the car’s structural integrity. Keep the radio off and listen carefully to various noises. Pay attention to how the transmission shifts and test the air conditioner. To assess it properly, drive it like you already own it; don’t baby it. If the rep isn’t agreeable to giving you the vehicle for a good hour, then take your business elsewhere.

Get a history lesson

CarFax, CarProof and AutoCheck history reports recognize rebuilt or salvaged vehicles, but beware: they may not disclose collision repairs if the previous owner chose to do them without going through their insurance — and up to half of all collisions go unreported. Avoid vehicles from out of province. Use the VIN number to search provincial records and ask your insurance agent to do a history search, too. While you’re at it, find out how much it costs to insure your model. A steep premium may compel you to look at something else.

Befriend a technician

Settled on the vehicle you want to buy? Have it mechanically inspected by someone you trust. Vehicles that have been repaired after a collision aren’t always easy to spot, which makes a professional inspection on a hoist all the more critical. A good technician can detect creases in the unibody and paint overspray. There are garages that only do vehicle inspections and do not perform repairs (vintage car collectors use them). Many shoppers won’t invest the half-day to take the car for a third-party assessment, which pretty well negates all the careful shopping they’ve done. It’s like dropping the ball at the 10-yard line.

Drive a hard bargain

New-car dealers love used cars. Profit margins on popular new models are razor-thin (luxury cars and SUVs are more lucrative), while used vehicles remain a bonanza for dealers who can lowball customers with trade-ins, recondition them, then “remarket” the vehicles for a lot more. The average profit on a used car is $1,800 to $2,200, while a high-volume new compact only earns $1,000 to $1,200 for the dealer. So don’t be afraid to play hardball. And watch for extra fees sneaking into the sales contract: administration fees are now part of the advertised price by law. If you’re not happy with the way negotiations are going, head for the door.

Source: Wheels

Why buy a car in December?

best time to buy a car

Although December marks the holidays and well-deserved time off, it’s a busy time of year. Between shopping for gifts and organizing family get-togethers, free time seems to quickly evaporate. And resources (both money and time) are predominantly spent on others as, after all, it’s the time for giving. Rarely is buying a car for yourself or your family on the radar at this time of year – but perhaps it should be. If you’re in the market for a car and looking for a great deal, the year’s end can be a smart time to act. Because everyone is so busy preparing for the holidays and spending their hard-earned dollars elsewhere, dealership sales are often very slow for the month of December. And being the last month of the year, their inventory is about to become one year older, motivating them to move their remaining model year vehicles. And they also need to make room for new inventory likely arriving by the boatload (often quite literally).  So, if you’re in the market for a vehicle — especially new, as they’re most affected by the new calendar year — now might be the best time to seriously consider purchasing and capitalizing on the available dealer and manufacturer incentives instead of waiting for the new year; especially if you aren’t too concerned about having next year’s model year vehicle. With some savvy negotiating that plays on the dealer’s lack lustre December sales and their need for month-end and year-end sales in order to hit sales targets, you could walk away with an incredible deal. A few quick sales at year’s end at greatly discounted prices can be worth their while in order to hit these sales targets that will generate  big objective bonuses paid out by the manufacturer. So perhaps put yourself on your holiday gift list and take advantage of the great deals that await.

Car Compass can help you attain a great deal over the holidays by managing the car buying process on your behalf, so you can enjoy your precious free time with friends and family and still reap the benefits of buying at this time of year. Give us a call! 416-477-9328

What is my car worth?

Is it time to look for a car? If you’re considering replacing your current vehicle, one of the first questions you should ask yourself before beginning car shopping is “what is my car worth?” Answering this question is an important starting point to address, as your current car’s value will help you establish a budget for a replacement. A great place to start is Canadian Black Book, which is a free and valuable tool to provide a reasonably accurate estimate of your vehicle’s value. It’s also great to help you determine whether you wish to perform a private sale or just use your vehicle as a trade-in as CBB provides value ranges for both. Also check Auto Trader to see what private sellers and dealers are asking for vehicles like yours in your area – this will also help you establish a realistic asking price. Trade-in values are notoriously less than those of a private sale, but you must factor your own time into performing a private sale as it can be quite extensive: getting your car clean enough to sell (and keeping it that way), taking appropriate photos for online ad postings, creating online ads after setting an appropriate asking price, dealing with prospective buyers and tire kickers, negotiating a selling price and dealing with low-ballers, getting a safety certification, providing a UVIP (used vehicle information package) etc. So, private sales are not for the busy or unwilling – they definitely take an investment of time. And despite your efforts, the added value of selling privately can quickly be eroded with the costs of safety certification and your personal time. But all is not lost if you opt for the trade-in route. Another consideration when contemplating trade-in values is an unseen value – the HST reduction your trade provides against your purchase. Your trade-in applies as a credit toward your replacement vehicle’s price, thus reducing the total taxable price. For example, if you’re looking at a $50,000 car and you’ve been offered $15,000 trade on your current ride, you will only be paying HST on the difference of $35,000; not on the full $50,000. So although your trade-in offer is $15,000 it’s really worth $16,950 ($15,000 + 13% HST savings). If your private sale would yield around $17,000 and your trade-in appraisal is only around $15,000 it’s likely not worth your time to consider selling privately as your trade-in’s value to you is actually $16,950. The disparity in values between private sale and trade-in are often much smaller than they initially appear once HST savings and your time are accounted for.

And here’s another variable to take into consideration: mileage. Obviously mileage affects your car’s value, but what you should know is that if you’re planning on buying a car from a manufacturer dealership (e.g. BMW Toronto) they likely won’t sell higher mileage vehicles they receive on trade. They will probably sell higher km vehicles to wholesalers, who then sell the cars to independent non-manufacturer dealers (e.g. John Doe’s Used Car Sales). Perhaps you can see where I’m going with this, but two additional parties need to profit from the transaction before the final selling dealer makes a profit. So if the vehicle you’re hoping to sell or trade has roughly 100,000 km or more, try going to an independent non-manufacturer dealer to see what kind of offers you can attain. It certainly can’t hurt to keep your options open. I personally like to use this technique as it sometimes maximizes my clients’ offers, and gives smaller, independent dealers some business. And if it doesn’t work out, at least we have an offer in hand that can be used to help negotiate the best trade-in value possible.

Car Compass is a Toronto-based automotive brokerage that assists individuals and companies throughout Ontario with their car shopping needs. From the initial stages of identifying suitable options from which to choose, through final negotiations Car Compass helps save time, money and uncertainty when looking for a vehicle.