Brokers breaking bonds

Time 10:17 am, September 23, 2008

042187600_1221743058.jpgCAR brokers are suffering the venom of dealers more than ever before, say latest reports.

Such sales, which undercut franchised dealers, are creating levels of bad feeling higher than ever before.

It’s yet another effect of the credit crunch. Dealers, fighting hard in a harsh trading environment, are ‘dismayed when they see new cars for sale at broker sites – at cheaper prices than they can buy them.’

That’s the word from automotive consultancy Network Automotive. MD Colin Bruder said: ‘Unscrupulous brokers, who employ various questionable methods in order to retail cars at below franchise dealer prices, have been causing bad feeling between manufacturers and their dealers for years.’

‘However, in recent months, our feedback from the market says that this situation has become ever more acute. Franchise dealers, who feel as though they are having to fight for every sale, do not like to see themselves being undercut.’

Dubious methods, says Bruder, include pretending to be a contract hire company in order to get volume discounts – then ignoring the ‘trust agreement’ and simply retailing the cars.

Brokers also sometimes call franchises posing as a fleet buyer. They then bargain hard to drive the price down, sometimes to below that it cost the franchise. Again, then retailing the car on at a higher cost.

Bruder said that an underlying problem was that the broker market had become so large that manufacturers could not ignore it. Instead, the solution was to put measures in place to control the numbers and prices of cars being sold through this route.

‘Really, manufacturers need to adopt a two pronged approach. Firstly, they should start to deal with broker sales in a structured manner, in order to support volumes, prices, residual values and their franchise dealers.

‘Secondly, they need to actively root out any activity that may be illegal or damaging, and this means asking franchise dealers to report any broker sales that undercut them, and finding out how those vehicles have reached the market.

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