Broker blockade: Industry crackdown reshapes dealership compliance

Paul Sansone Jr. explains how regulators in New Jersey are cracking down on illegal broker activity, reshaping how dealers handle new vehicle sales.

The automotive broker industry faces increased scrutiny as tighter franchise laws, differences in state-level enforcement, and growing pressure from dealership groups reshape how new vehicles are sold.  Brokers act as intermediaries in a system usually reserved for franchised dealers. They connect buyers with dealerships and collect fees from both. Critics say brokers can distort pricing, weaken compliance, and challenge dealer agreements. While some states allow brokers but require a license and forbid them from handling vehicles, others, like New Jersey, ban the practice. 

On today’s episode of Inside Automotive, we’re joined by Paul Sansone Jr., owner of Sansone Jr’s Auto Group, to discuss the issue in New Jersey and across the country.

New Jersey cracks down on broker activity

New Jersey regulators warn that dealers engaging in broker transactions could face fines or even lose their motor vehicle licenses. Sansone says the regulatory framework is already clearly defined.

“In New Jersey, it’s against your motor vehicle license to sell to a broker,” he said. “Significant fines and loss of your motor vehicle license, which puts you out of business in New Jersey.”

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Sansone adds that compliance cannot be selectively applied.

“You have regulations on the books, you’re either compliant, comply with them, or not,” Sansone said. “You can’t have rules you want to adhere to and rules you don’t want to adhere to.”

Why OEM guidelines aren’t enough 

Automakers, including Toyota, Kia, and Nissan, have issued guidance to dealers reinforcing restrictions on broker-related transactions, signaling increased enforcement of franchise agreements and incentive structures. Despite those guidelines, Sansone says enforcement of the manufacturers’ policies is often inconsistent.

“For me, it’s a black and white issue,” Sansone said. “The manufacturer clearly states that you do not pay any of the manufacturer incentive, lease specials, etc., on sales to brokers.”

Sansone says broker activity has reached significant levels in some markets, disrupting traditional retail sales structures.

“Some districts have as much as 40, 50, or 60% of their business sold by outside brokers,” he said. “It’s created quite a horrible selling environment in our area.”

“Broker activity has been going on forever for a very long time in our area,” Sansone said. “Now we just are asking for the enforcement and guidelines.”

Added risks of failing to comply 

Sansone warns that broker-related activity can introduce internal compliance risks and oversight challenges within dealerships. Dealerships that fail to comply with regulations governing broker activity may also expose themselves to additional risk by giving competitors, and even employees, potential leverage against them.

“Every employee you have has an ax over your head,” Sansone said. “You will never be able to fire an F&I manager, a billing clerk.”

Sansone says meaningful enforcement is likely to begin once regulators take action against individual dealers.

Sansone had some parting advice for dealers that face increased brokerage activity in their market.

“I just encourage the dealers, if there’s that much activity in your market, then go out to figure out how you can get that market,” Sansone said.