A beginners guide to selling cars on consignment. If you are thinking of consigning a car for the first time you’re in the right place. Our beginners guide to selling cars on consignment will teach you everything you need to know and help you make the right decisions.
What does selling a car on consignment mean?
A consignment sale is a service normally offered by garages and used car dealer. The consigner (the owner of the car) leaves a car with the garage or dealer to sell on their behalf on a fixed rate of commission. This service is also know as ‘sale or return’ (SOR) or ‘on behalf of’ (OBO).
How a consignment sale works
Most dealers offering a consignment service work on either a fixed fee commission or a percentage of the retail sale price of the car being consigned. This commission is only payable once the car is sold. In most cases both parties will agree a retail value of the car in question, the dealer then markets the car on behalf of the consignee. It is then the dealers job to take car of all the negotiations and other responsibilities involved with sale.
Some dealers do charge ‘take on’ fees and may insist a car is inspected and valeted prior taking a car in on a consignment basis, they may also insist a car is dropped off with a full tank of fuel etc.
In most cases both parties will agree the retail value of the car in question, the dealer then prepares and markets the car on behalf of the consignee. The garage will then contact the consignee if they receive an offer or if the car is sold.
Is selling a car on consignment a good idea?
In some cases selling a car on consignment can work very well for both parties. The garage or dealer gets to sell a car without owning in and the seller gets a better price for their car without the risk and hassle of selling privately. But it often depends on the car and its value, and the type of car.
What types of cars are most suitable to consignment sales?
Almost any car can be sold on consignment. But this business model is usually associated with higher end prestigious or high performance cars and classics. These cars can be harder to sell privately and are less likely to be traded in against a new car. However some smaller garages are happy to sell sub £10,000 or $10,000 cars on a commission basis. This arrangement can suit car flippers and the general public who are keen not to deal with the hassle of front line car sales.
Very high end modern and classic cars are often sold in the manner, as most garages are unwilling to buy cars that are worth million if not tens of millions without having significant margins.
How much do dealers charge to sell cars on consignment?
Consignment fees can vary massively with some dealers charging tens of thousands for selling ultra expensive cars. But often the dealers charge fixed fees regardless of the final sale price, these typically range from £1000 – £5000 or a similar amount in dollars. Older more establishments dealers often work on a percentage with 5% to 15% percent being the norm.
Should you sell you car on consignment?
You may want to sell a car on consignment for a number of reasons. The most common reason for selling a car in this way is receiving a poor or low ball part exchange price on you personal car. Obviously garages are in business to make money and you may just not be happy with their offer, at which point a consignment sale can be a great option.
Secondly you may have a rare or specialist car that’s very hard to sell or value. Selling a car via consignment can allow you achieve the best possible result while avoiding the risks of selling it yourself or via auction. You may also be able to consign a car at a garage that specialises in the make and model you own, and this type of sale will often allow you achieve a price that you otherwise couldn’t hope to achieve privately.
Lastly you might be a home based dealer or car flipper that has a specialist car to sell or again something more upmarket that will sell better from a garage or forecourt.
Who should you consign you car to?
A garage or dealer you trust, that is well established and that has a good reputation is the obvious answer, it’s also the correct answer. But it is a bit more complicated than that. If you have a specialist car of some value it’s worth consigning the car to the market leader in the type of car you have to sell. You will then benefit from expert advice, years of specialist experience and most importantly their customer base.
If you have a more mainstream car you should consignment you car to a local garage or dealer that again is well established, has a good reputation and most importantly you trust. Trusting the car is very import, not only because you are giving them a valuable asset, but because a well trusted business will generally sell more cars. Newer business should be avoided if it all possible. They may be keen for the business and be willing to work for a lower commission rate. But paying a little bit extra for peace of mind and a no hassle deal is often the best policy when it comes to selling a car on consignment.
What happens if your consigned car fails to sell?
Garages often have a limit to how long they will keep a car on consignment for. This normally ranges from 3 to 6 months for more modern cars. But I have seen specialist cars and especially classic that have been on consignment for years before finding a new owner.
If a cars fails to sell or is receiving little interest a dealer will normally contact to discuss the potential reasons for the car not selling before you reach this point. Car sales can be a very fickle business and sometimes cars just don’t sell very quickly. This can be for a number of reasons, ranging from the time of year to the colour or condition of the vehicle. The area you have chosen to sell your car in can also make a huge difference to if a car sells or not. But in most cases the price is the problem when a car fails to sell.
So it’s important to have an open discussion with the dealers to understand why are car hasn’t attracted a buyer. The dealer is often keen to have this chat as he will have invested a great deal of time and money in marketing the car.
Does a garage insure a car that on consignment?
In most cases a garage or dealers insurance will cover your car whilst it is in their possession and control. This will include comprehensive road risk cover for test drives. A garage may however insist you keep your car insured yourself and only cover the road risk side of insurance. This is because of conflicts of interest that can occur when customer no longer has cover for their car.
However every dealer is different and you should ask this question before agreeing to consign you vehicle. You should also notify your insurance company and update it as to where it is being stored.
Should I have my car serviced and valeted before consigning it?
Presenting a car in top condition is always best practice, and a dealer will be more likely to agree to selling a car that is presented well. So a professional valet is a good investment in most cases. However some garages will want to inspect and service a car themselves before agreeing to a consignment sale. There can be for a few reasons. In some cases it’s because they want to charge you a take on fee to make some upfront cash on the sale and boost profits. But often it’s because they need to have serviced a car before they can acquire a used car warranty. Some dealers have also fallen foul of people asking them to sell cars previously that have had issues and want to inspect the car toughly before taking it onto the books.
Again, every dealer and deal is different so it’s best to have an open discussion about this before agreeing to consign you vehicle.
What can go wrong when you sell a car on consignment?
Consigning a car is not without its risks. But almost all the risks and dangers can be avoided by using dealers that are well establish and have great reputations. You can of course always be unlucky and your car could be damaged or vandalised whilst on sale or test drive. But the garage or your insurance would cover and potential damage in almost every case.
Unscrupulous dealers can obviously be a problem and I have seen and heard some horror stories over the years, from dealers using consignment cars for everything from personal transport to wedding rental cars and taxis!
In one case a dealer friend of mine lost thousands consigning cars to another dealer. Unbeknown to my him the dealer he was using was suffering from financial difficulties and after a few month went into liquidation. After hearing the news he went to collect his cars and was relieved to find they were still on the dealers premises. But on closer inspection the engines and gearboxes were missing on some of them along with other parts! The dealer had sold them to try and stay in business leaving my friend with only the body shells!
I have also heard of a used car dealer who took out loans against the cars he had on sale or return. He did this by altering copies of logbooks and fooling a small finance house into thinking the cars were in fact his. He then sold the cars and didn’t notify the owners and pocketed both the loan money and the cash from the sale of the vehicles. He did this over 50 times before disappearing with all of the money. The good news is that eventually everyone involved received either their money or their cars back, with only the finance company loosing out. The dodgy dealer was never prosecuted and it is believed he moved abroad.
But in truth you are unlikely to suffer any issues if you use an established dealer, and a financing or similar scam would need to be very sophisticated to succeed these days. The horror stories above all took place over 15 years ago and modern finance and paperwork procedures mean you are unlikely to experience any issues these days.
Will I make more money consigning a car or selling it privately?
In most cases you will make more money selling a car via consignment than selling privately. This is usually down to the fact that private sellers can’t offer the same reassurances and services that a garage or dealer can. The services include part exchange, test drives, finance, extensive marketing, warranties/guarantees and the peace of mine that buying from a dealer offers. These advantages alone give a consignment seller a significant advantage, and this is before you take into account a dedicated and experienced sales team and a well located sales pitch or showroom.
But obviously a vehicles price can be a factor. If you are selling a cheaper car you can often end up with the same amount of money in your account after commissions are payed. But again a consignment sale might get your car sold faster and you won’t have the hassle of dealing with enquires etc.
What paperwork do I need to consign a car to a garage?
In most cases a garage would require you to supply the hand and service books for the car and a copy of the registration certificate or logbook. In addition to this they will in most cases ask that you sign a contract outlining the services they offer and the agreement terms are conditions.
How will I get payed once my car is sold?
The garage will receive payment for you car from the new owner prior to delivery. They will then pay you the balance minus the commission fee and any outstanding finance or other costs via bank transfer. This normally happens either the same day or within a 48 hour period. But a good proactive garage or dealer will outline the payment process prior to agreeing to take your car on on consignment.
Will a garage give my details to the new owner of my car?
No. It is highly unlikely that a dealer would pass on your personal or contact information intentionally. This is usually a conflict of interest and would breach client confidentiality rules and in most cases personal data protection laws.
If my car is sold overseas would I need to assist in the cars shipping?
No. A dealer would take care of the logistics and shipping arrangements within the agreed commission structure. If the shipping cost where to be split between the buyer and seller a dealer my ask you to contribute to get a deal done on the car. But this would be at your discretion unless it was outlined in the sales contract.
How can I find a reputable dealer to consign my car with?
Finding a reputable dealer or garage to sell a car on consignment has never been easier. You can simply look for reviews and testimonials on the internet. Social media feeds and local business search results will often tell you all you need to know, with disgruntled customers being the first to shout about problems or issues with a dealer. Most dealers living in fear or bad google reviews so these are also worth checking out.
If you are consigning you car to a smaller local garage word of mouth is often the best way to judge a garages reputation.
The Pros and Cons of selling cars on consignment
- Maximum returns on your car
- Greater marketing reach
- Car sells faster in most cases
- Safety and security
- Expert advice
- Insurance for test-drives and viewings
- The ability to take cars in part exchange
- Being able to offer finance
- Peace of mind for the buyer
- Not having to to deal with the general public
- You have no control of the sales process
- An unscrupulous dealer may abuse the arrangement
- Your car may be damaged whilst on consignment
- You may have trouble finding a trustworthy dealer in your area
- You may have to pay a ‘take on fee’
Consignment sales can be a great way to sell a car. In most cases you will receive significantly more money back than you would if you part exchanged a car or tried to sell it privately. There are often little or no upfront cost and you benefit from a garage or dealers years of experience and expertise, and in most cases it is almost hassle free and the risks are very low.