Car sales brokers: The pros and cons

The used vehicle sales ecosystem is largely driven by the Sales Brokers in African, Europe and the USA.

The brokers act as independent intermediaries between the car buyers, showroom inventory owners and individuals selling their cars.

Indeed, their role has become a thriving “self-employment” creation hub or entrepreneurship cluster that economists unfortunately do not really talk about. In Zimbabwe these sales brokers are nicknamed “musondosi”, which means a “troublesome middleman”.

However, while this role is part and parcel of the sales process on used cars but in developed countries they are regulated and there are rules to be followed while in Africa it is completely the opposite.

Today l will breakdown their roles and dissect them into the pros and cons to help both the showroom inventory owners, individual car owners and the buyers to understand the intricacies and become wiser when getting their services in a sales and purchasing transaction.

There is no doubt in my mind that these sales bokers indeed offer a turnkey service to the vehicle owners to make a sale and the buyers to find the right cars which includes;

• They search and identify the right cars for the customers that correspond to their rightful purpose and budgets
• They sell the car inventories for the showroom dealers or individual car owners
• They have the expertise to check and verify the condition of the cars as many buyers do not understand how to check cars properly
• They negotiate the prices based on their knowledge of the market prices and industry trends
• They assist in arranging the right documentation required when customers are purchasing the cars through finance
• They assist is reading and negotiating the terms of the sales agreements
• They assist in the transfer of ownership of the car after the successful purchase
•  They assist in driving the cars, particularly, for customers who travel from rural areas to buy cars in city centers which they may not be familiar with driving around

The pros;

• There are huge benefits that comes with using the services of sales brokers including;
•  Customers benefit from the sales brokers’ extensive network of showroom dealers who stock the right vehicles wanted by customers
• Car buyers reduce the costs and the usual overwhelming car buying process that traditionally involves visiting multiple dealerships, some of which can be high-pressure environments that can make buyers very uncomfortable
• The showroom dealers and individual car owners get customers ready to buy immediately their cars without spending too much on advertising
• Showroom dealers and individual owners make sales quicker without going through the rigorous negotiation process by themselves with customers who usually come as a family to buy
• The showroom dealers reduce their monthly expenses on salaries as these sales brokers only take commissions on concluded sales
• The showroom dealers benefit from the sales brokers who already have the product knowledge and the industry’s technical sales jargon, sales process flow and convincing prowess
• The end buyers benefit from the fact that a sales broker is not loyal to a specific car brand and to a single showroom dealership. This helps in being impartial as most showrooms tend to negotiate with customers unfairly to sell their stocks only even if not suiting the customer’s preference
• Sales brokers offer a personalized service to the buyers and hence the shopping experience which is usually very complicated becomes easy and more secure, when the customer is dealing with those who are genuine

The cons;

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• Car sales brokers: The pros and cons

To any given situation there is always the other side of the coin and in respect of “musondosi” role there are some negative points to be careful about as below;

n In Zimbabwe and many African countries, the brokers are not regulated by any industry ethics or business principles. This is unlike in Europe and the USA where they get licensed to provide this service and hence the risk is high when using them

n It is expensive, sometimes, to use them because they usually operate with a fixed sales commission in mind on any transaction. In other situations, one sale involves several brokers which results in the customer paying a higher price or the vehicle owner who ends up taking home less money

n Some sales brokers mislead customers into buying bad condition cars because of their ignorance and limited knowledge about cars. They also go the extra mile in preparing some cars so that they do not easily expose their bad condition during the test drive such as suppressing the blue or gray exhaust smoking which is caused by worn out piston rings

n These intermediaries are usually very greedy and if they see that they may not get the amount they want they can easily influence the customer to believe that the car is in bad condition as a way to drop it and consider another one which only gives them the advantage on the amount of commission

n The majority of them do not have any fixed location and hence it is risky to trust them with your money like in a case where a customer will have come from the village with hard cash and after failing to finalize on a car on the same day there are cases where the brokers persuade the buyers to leave a deposit for them to keep looking for a good car

n Some sales brokers demand sales commissions from both the buyer and the seller of the car which makes the cars expensive

n It is risky to sign an agreement of sale with the sales broker as the seller when he/she is not the owner of the car and perhaps has no registered business or showroom to come back to in case of any issues

The way the sales are cultivated in Africa is largely influenced by word of mouth marketing and this customer behavior favours the sales brokers’ services. When someone is looking for a car they usually ask their friend or brother or sister where they bought it and in the process the broker gets another lead.

Just from the number of sales l see coming from the sales brokers compared to those coming directly from the end buyers’ l can confidently say that those coming through the brokers constitute the biggest number.

So realistically the sales brokers are a strong part of the sales ecosystem of used car sales the world over.

On the other hand, the customers who want to buy cars do not have the knowledge to handle the complex buying processes and the capacity to deal with the showroom stock owners who are usually too busy to entertain a lot of negotiations.

With this scenario it is my opinion that the industry associations should emulate the systems from USA and Europe to try and bring sanity to the industry.

There are basics that should be enforced by the dealerships including the requirement for a sales broker to provide their ID copy, passport photo, Police clearance and proof of residence.

In Zimbabwe sales brokers are usually found at the entrances of major showrooms like the flyover car sales located just as you drive out of Harare CBD going towards Chitungwiza road and at the enterprise car sales towards Newlands.

The sales brokers are the first people to greet you when you pay a visit to view cars on display.

Unfortunately, sometimes they make the shopping experience for customers so unpleasant with their aggressive approach to claim ownership of the customers.

It is my advice, though, that the sales brokers themselves should also start creating structures on how they conduct their business by improving their conduct and behavior to improve trust from their value chain partners and the customers including;

n Establishing domestic sales transaction points through specific showrooms that stock vehicles, accept their stock inventory and sign up contracts with clear business terms and process flows

n Establishing international sales transaction points through specific vehicle exporters and sign up contracts with clear business terms and process flows

If the sales brokers organize themselves into an organization and have identity cards, have a fixed commission structure based car prices, accept deductions of withholding taxes on their commissions to maintain compliance with the authorities, sign up contracts with showroom dealerships on sales and when they provide inventory to the showrooms then the possibility of scaling up their services and membership becomes feasible.

The services of being a sales broker in this industry are also required by foreign companies that export cars into Africa.

But the possibility of working with them lies in being structured, honest and consistent in the service delivery. 

This is an interesting model that l am willing to invest my time in developing and supporting because it is definitely one of the value chains within the ecosystem of selling used cars to customers to meet the growing demand of cars.

• Stanley Makombe has 25 years of experience in the motor industry, currently handling vehicle imports from Japan, Thailand, the UK, and South Africa into African countries. He is writing in his capacity and can be contacted on +254 743 900 590, on X @Stan_Carsales, email: [email protected], www.stanleymakombe.com

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