What does it mean to sell a car on consignment?

By Chad Lückhoff

Consignment will see you handing your car over to a dealership to sell it on your behalf, only receiving payment once the car is sold to the next owner.

One of the biggest concerns when trying to sell a car, aside from setting the right price, is trying to make sure you don't get scammed or have your time wasted. It's for this reason that selling a car on consignment often seems appealing.

If you've decided to sell your car, you may have noticed that dealerships are only prepared to offer you a fraction of your selling price, especially when trading in. Selling it privately allows you to price the car more competitively and yielding a greater profit.

Advertising your car in the classifieds opens you up to tyre-kickers, time-wasters, and scam-artists and can place you at unnecessary risk. This is often enough to force someone into settling for the low-ball amount offered by the dealerships.

One option is to sell your car on consignment, but what does that mean?

A consignment sale will see you leaving your car on the dealership floor for the dealership to sell. They will place a small markup on the vehicle and facilitate the transaction.

Benefits

This has several benefits. Firstly, potential buyers are not rocking up at your house and you are not meeting strangers at a garage forecourt. In fact, you may never even meet the buyer of the car.

Secondly, the dealership may be able to assist the potential buyer with financing. If you were to sell it privately on your own, you would require an EFT or bank guaranteed cheque – and even this could be risky. Selling on consignment allows your vehicle to appeal to a wider audience.

You also have the benefit of feet. Feet through the door at the dealership places your car in the line of sight of potential buyers.

The dealership will also know what documentation is needed from either party in order to transfer ownership and the likes, although that will remain the prerogative of the buyer.

Downsides

You know what is said; if it seems too good to be true, it usually is. So as good as a consignment sale sounds, you need to be aware of some of the negatives.

Not all dealerships are prepared to take consignment stock. Consignment sales don't form part of every dealership's business model so you can't expect them all to agree to it. If you have a car that is particularly difficult to sell, the dealership may turn you away as the amount of effort, and space consumed by an unpopular car may just eat into their profits.

You may not get your full price. Because the dealership is in the business of making money by selling cars, they will need to attach an amount that will form part of their commission. Pricing your car too high won't allow them to do that so they may request that you sell your car for a little less, making space for their markup.

You only get paid when the car sells. This is the big downside to consignment sales. Placing the car on the floor of the dealership will not put money in your pocket right away. In fact, it may cost you money. The dealership may require you to continue paying your insurance in order to safeguard the vehicle on their premises. If you are paying the car off, you will still be required to pay that instalment even though you are not driving the car.

Not having the car in your care means that it may be subjected to nicks and scratches from passing onlookers and if it is standing uncovered, will be subjected to the elements, possibly damaging paint, interiors and trims.