Selling your car has always seemed like a binary choice: Either trade it in to a dealer for a pittance or put it up for sale yourself and face ridiculous inquiries, insincere tire-kickers, and the risk of counterfeit checks. But there’s now a third possibility: consignment sales.
Consignment means hiring someone to sell your item for a fee. It’s been common for decades in other trading spheres—art, antiques, boats, planes, and real estate. And it’s been part of the collector-car world virtually from the moment someone first asserted that a car was “collectible.” Now it’s becoming more popular for ordinary cars, as sellers try to maximize their cash returns and as the internet makes marketing items easier.
“My background is that I’ve been a car nut my entire life,” states Matt Fenster, 45, a consignor who established SellYourSportsCar.net in Troy, Michigan, while maintaining his day job in commercial real estate. “I’ve applied everything I learned in real estate to this business,” he says. “I have a warehouse, and everything we do is internet-based.”
Consignors range from guys who let their buds park a heap in front of their trailer to high-end businesses like Canepa Design in Scotts Valley, California, which displays multimillion-dollar vintage race cars in an air-conditioned showroom. The laws covering consignments vary from state to state, and there doesn’t seem to be much consistency in how consignors operate their businesses.
Fenster charges flat rates based on the car’s selling price. “It’s $1000 up to a $20,000 price. Then it rises to $1500 for up to $30,000, and I charge $2000 beyond that,” he says.
In contrast, Mike Cummings says, “I don’t charge anything upfront.” Cummings is a used-car sales manager at Cole Automotive Group, a Fiat Chrysler and Mazda dealer in San Luis Obispo, California, that has accepted consignments for three years. “It’s an alternative to trading the car in,” he says. “I don’t charge anything, and I tell them upfront what I’m going to sell their car for. And they know what they’re going to get back in cash.” Cole Automotive keeps the difference between those two prices, which, says Cummings, can be as little as $1200. But the consignment transaction also gives the dealership a chance to sell financing products and to take in a trade that it can resell.
Trading times: The difference between trading in a 2010 Ford Mustang GT to a dealer and selling it yourself works out to about $2000. —KBB.COM
What Cole won’t do is front the money on a consignment for the consignee to use as a down payment on a new car. “You still need to trade your car in for that,” says Cummings. “But it’s a high-income area here. We have a lot of people who own a third car that needs to be sold.”
Consignors can help owners set realistic prices for a car, market the vehicle, and handle the title and money. Those details, and the duration of the marketing effort, should be spelled out in a written contract before the consignor takes possession of the vehicle. And the consignor should, of course, be bonded and insured. Consistent communication between seller and consignor is also key.
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There’s no guarantee that a consignor will be effective at marketing your car, so visit the place and also look at its internet presence before offering to hand over any hardware. If you aren’t impressed with how the cars of others are marketed, why entrust the consignor with yours?
CONSIGN WITH CAUTION
In September 2010, a consignment lot in Santa Barbara, California, called Montecito Motors, closed shop amid allegations that it failed to pay owners for cars it had sold.
According to the Independent newspaper, the list of cars included a 1969 Mercedes-Benz 280SE that had been sold without giving any of the $50,000 selling price to the owner. In 2011, the lot’s owners—Adam Taylor; his father, Chet; sister Sarah; and Chet’s wife, Jennifer—were charged with 59 crimes that included grand theft, conspiracy, and forgery.
According to the indictment, the Taylors had scammed more than $1 million from at least 26 victims dating to 2004. In May 2012, Adam and Chet pleaded no contest to 46 felonies. Adam was sentenced to 11 years in prison, while Chet got 13 years. They were ordered to pay restitution and back taxes of $6.5 million. But there were no assets to seize, so the victims are screwed.
Pick your consignment shop carefully, people.
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