What is an auto broker?

California DMV Certified Auto Dealer License Educator #CCC0028

What is an auto broker?

December 21st, 2021 by Garrett Eddings

Auto dealer salesman on the floor talking to everyone

An auto broker is simply an endorsement to a retail vehicle dealer’s license. They specialize as an auto buying service locating vehicles for customers according to their parameters and specifications of the vehicle the customer is looking to buy.

Auto brokering is an contractual arrangement a fee or other consideration whereby a dealer provides or offers to provide the service of arranging, negotiating or assisting the purchase of a new or used vehicle, not owned by the dealer, for others.

What do auto brokers do?

Auto brokers do the negotiating with the selling dealer on behalf of the customer. They have the knowledge regarding vehicle values, financing and assisting the customer for the purchase of a new or used vehicle. Being more experienced than the general public, the customer is more likely to get a better sales price for the particular vehicle they want to buy.

How to become a California certified auto broker?

Currently DMV will issue an auto broker endorsement to a retail dealer’s license, therefore you must comply with the requirements set forth by the Department. If you already have a retail dealers license you would simply apply for the auto broker endorsement. You need to complete the following:

  • Complete the OL 21 Form
  • Pay the Fee of $100

DMV is no longer issuing an auto broker endorsement to a wholesale dealer. If you are licensed as a wholesale dealer you will need to complete the following:

  • Complete the OL 21 Form
  • Obtain a commercially zoned location that consists of:
    • An Office
    • Sign visible from 50 feet – no less than 2x2
    • Have a display area large enough to accommodate the vehicles you offer for sale
    • Obtain a 50 thousand dollar bond
    • Comply with all other requirements for a retail vehicle dealer
    • Pay the fee of $100

Auto Brokers are subject to all licensing, advertising and other regulatory requirements and prohibitions applicable to a retail dealer.

What Records does an auto broker have to maintain?

Brokering Agreement
The brokering agreement must be in writing. Every customer who enters into a brokering agreement shall receive a copy at the time of signing the agreement or prior to accepting a fee of $100 or more, whichever comes first.

Auto Broker Log
Every transaction by an auto broker is to be recorded on the auto broker log – DMV Form OL75. The OL 75 form consists of the following information:

  • Brokering dealer’s name and dealer number
  • Brokered Vehicle Identification Number (VIN)
  • Brokering Agreement Date
  • Selling Dealer’s Name/Address and Dealer Number
  • Customers Name

Common Violations of Auto Brokers

  • Fail to execute a brokering agreement in writing and giving the customer a copy of the agreement.
  • Accepting a deposit from a consumer that exceeds 2.5% of the selling price of the vehicle as described in the agreement.
  • Fail to deposit funds collected into a Federally Insured Trust Account
  • Fail to cancel the agreement and refund the consumer prior to signing a vehicle purchase agreement with the selling dealer and taking delivery.
  • Vehicle brokering fees exceeding the final purchase price of the vehicle
  • To act as the Seller and Auto Broker in the same transaction.
  • Disclosure to the consumer that the Auto Broker receives compensation for the transaction no matter what form of compensation.
  • Fail to maintain the Auto Broker Log - OL75
  • Fail to notify the customer, prior to accepting a deposit that a full refund will be applicable if the vehicle ordered is not obtained within a specified period of time.

Can you make money as an Auto Broker?

As a car buying service, putting the buyer and seller together can be lucrative especially since the marketing inventory is not purchased by the auto broker. Many people enjoy the convenience of not having to go to a retail dealership and haggle the price to purchase the vehicle they have in mind and prefer to leave it to a professional. Not only does this save the customer time and frustration with their purchase, it also potentially is saving them money on the deal because with the auto brokers knowledge, savings could potentially be on rebates, warranties and extras. Auto brokers can assist their client with the purchase of New Vehicles, Used Vehicles and Leases. Contract forms are available for the dealer’s convenience, you may also find the contents of a brokering agreement under section 11738 California Vehicle Code.

Posted in: Auto Dealer Business


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