Anyone taking cars on consignment? How do you handle the money side?

[garagebirds]

Disclosure: I'm the founder of GARAGEBIRDS, dealer software for small used-car lots, so I'm asking for a reason. Not selling anything in this thread though.

On paper consignment looks like a good deal. More cars on the lot and none of your cash tied up in them. But the money side after the car sells seems to be where it gets messy, so I'd like to hear from people who actually do it, or who tried it and quit.

If you consign, how do you set your cut? A percentage, a flat fee, or a set amount to the owner?

When the owner still owes on the car, how do you handle the payoff at the sale?

Who pays for detail and repairs, and how do you keep track of it? Spreadsheet, your DMS, a folder in the drawer?

And if you don't consign, what stopped you? Not enough money in it, your state's rules, or just more hassle than it's worth?

 

[jmc11]

I’ve worked with this model before. In my experience:

1. The dealer’s cut is usually a percentage—generally 8% to 15% depending on the vehicle, expected margin, and relationship with the owner. Another option is agreeing on a fixed net amount the owner will receive. Either way, put it in writing.
2. If there is a lien, verify the payoff before accepting the vehicle. Once the buyer’s funds have cleared, pay the lienholder directly, deduct the agreed commission and authorized expenses, and remit the remaining balance to the owner. The exact process and timing depend on state law, and the proceeds should never be treated as general operating cash.
3. Recon should be addressed during the appraisal. Agree in advance on what the vehicle needs, who authorizes the work, who pays, and what happens to those expenses if the car does not sell. Track everything by VIN in the DMS or accounting system.
4. It can be a good model, but it is not risk-free inventory. You replace floorplan exposure with title, payoff, custody, communication, warranty, and reputation risk. Owners will constantly ask whether their car has sold, and any post-sale problem usually becomes the dealership’s problem in the customer’s eyes—even when the vehicle was sold as-is.

For a cautionary example, look into the collapse of GVE London. It operated heavily through sale-or-return consignments, and its failure resulted in ownership disputes and customers trying to recover their vehicles. The lesson is that controlling the vehicles is easy; properly controlling the titles, proceeds, and obligations is the real business.

 

[garagebirds]

Thanks, this is really useful. "Controlling the vehicles is easy; properly controlling the titles, proceeds, and obligations is the real business" pretty much sums it up.

Two follow-ups if you don't mind.

When the payoff is more than the car will net the owner after your cut and costs, do you still take it, with the owner bringing the difference to closing, or do you pass?

And the proceeds: do you keep them in a separate account until the owner's paid, or just track them in the books?