Should You Use A Dealer Or Broker For Car Finance?

Wednesday, 2. November 2011

A few days ago I had a very interesting chat with a referred client. He had always obtained his cars from dealerships in the belief that this was the best way to do it. He had moved from HP to PCP as it removed the risk in the resale value of the car. His last two cars, funded on PCP, were simply handed back to the leasing company as they weren’t worth the final optional balloon payment. He was quite happy with that as he understood that there was a loss that he passed on to the leasing company rather than sustain himself.

As I have covered the difference between PCP and personal contract hire in the past I won’t cover it again but there were a couple of other areas that I haven’t covered off for some time that would affect a customer’s decision to use a dealer rather than a broker.

Firstly he believed that he had negotiated a good deal on the car and was concerned that we couldn’t do the same. The salesman had spun a couple of good lines explaining that he had a higher bonus in the car if he could sell it that month and was therefore prepared to give away 10% discount.

The customer believed that to be a great deal and good negotiating on his part. However, after allowing for the many bonuses available on cars sold to leasing companies, these can equate to a total discount of up to 45%.

So whilst the 10% looks like a really good deal more could be achieved by the leasing companies that buy cars in their thousands each year. We then broached the subject of support.

The client was of the opinion that as he was a direct customer and had spent some time with the salesman who said that he would be available should he have any problems that this would be better than dealing with a broker?

No, because the broker (not talking about the bucket shops here that advertise cheapest lease rates on the internet) actually works for you as an independent. Whichever way you look at it to a car salesman you are yesterday’s deal.

If you have a complaint that you make to the dealership, whilst a good salesman will try to sort it out, he also works for the dealership and if the complaint could result in the dealer being out of pocket he will obviously fight on behalf of the dealer – the person who pays his wages.

I have customers that have been with me for over 20 years, swapped between car manufacturers and types of cars, the one consistency has been me and my desire to provide a continuing service. The salesman is more likely to change jobs during the period of your contract than an established broker is likely to stop doing what he does.

Finally, isn’t it best to use the manufacturers own finance company rather than an independent? It sometimes is as they occasionally have some subsidy included in the deal by the manufacturer to encourage customers to take up their finance and give them greater control over the customer base.

Much better to have control over the vehicle supply as well as the finance than just the vehicle supply. However, if you take a well known German manufacturer as an example, we often have the best rates provided by their own finance arm, known as a ‘captive’ but I put all my deals through one dealer using the finance provided by their in-house funder.

We get better terms on the supply of the car and lowest rates, as the rates provided to each dealership vary with the amount of business they write. With several of us brokers using the same dealer he keeps his volume high and we achieve the best rates.

Better still is if our independent funder can supply better rates as we normally receive a better service from them and if there is an issue they are more likely to be on the side of the customer than the supplying dealer or manufacturer.

Along with our independent advice you get a better all round deal. Also, if we have used just one dealer for all of our vehicles of that make he is more likely to help to resolve the problem, should one arise, rather than lose all of our joint business.

So no, it is rarely better to use the dealer for your car/finance package unless you are comparing with the low service providing bucket shops. By Graham Hill