Consignment is a related but distinct concept from brokering. In a consignment arrangement, a vehicle owner — often a private party — places their vehicle with your dealership for you to sell on their behalf. You display the vehicle, market it, and handle the sale. When the vehicle sells, you take your consignment fee and remit the balance to the owner.
Consignment sales require a written consignment agreement between you and the vehicle owner. This agreement must specify the terms of the consignment: the asking price, your fee or commission, the duration of the consignment period, what happens if the vehicle doesn’t sell, who’s responsible for insurance and storage during the consignment period, and the owner’s right to terminate the consignment and reclaim their vehicle.
A critical compliance point with consignment vehicles: you must disclose to the buyer that the vehicle is being sold on consignment. The buyer has a right to know that you don’t own the vehicle. Additionally, you must ensure that the title transfer goes directly from the consignor (the owner) to the buyer — you do not take title to the vehicle in a consignment arrangement. If you take title, it’s no longer a consignment; it’s a purchase and resale, which has different tax and disclosure implications.
Be careful with consignment vehicles and lien checks. Before accepting a vehicle on consignment, verify that the owner has clear title. If the vehicle has an outstanding lien, the lienholder’s interest must be satisfied before the vehicle can be transferred to a buyer. Selling a consignment vehicle with an outstanding lien that you didn’t discover can result in the buyer not receiving clear title — a serious problem that will come back on you.