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I've worked for several consignment dealers, and still sell my cars through them-it really is more convenient, and I think they are usually able to get a bit more than I would out of my garage, so I think their "fee" is almost a push sometimes.
Still, do your due dilligence.
The biggest risk is the dealer that is in financial trouble (taxes, ex-wives, hookers, blow, whatever) who is selling cars but not telling his clients. Avoid this by KEEPING YOUR TITLE in your possession. Give the dealer a copy for his records, and to show that you are actually the guy who can sell the car when he finds a buyer.
INSURANCE. Who's got it? Many dealers have blanket coverage that will cover their consignments. Some don't. Keep your insurance active if you need to, and make sure your coverage is valid while parked at a dealer. If you go with the dealers coverage, make sure it will pay you your agreed value if its stolen or burns up.
Where is it kept? Some dealers keep cars outside. Who gives these guys their cars? (That might even void your insurance coverage you thought you had)
Test drives. Make sure that they are kept to a minimum. As a salesman, you hope that the drive will tip them over the edge, but honestly, you want the dealer to be cautious. Who doesn't want to drive an LS6 Chevelle? A test drive should be the last step, AFTER they've asked the wife and lined up the money. Any statements that start with "I'm expecting a settlement any day...." won't require a test drive.
What's the fee? 10% is a pretty established number. Some lots may charge a monthly fee, if only to keep the cheapskates looking for free storage at bay. I don't like setups where you give them a number and they tack on whatever they feel they can get above that. They usually add too much, turning your car into an overpriced dud that becomes dead inventory. There should be a consignment document that spells out what you expect to be compensated for if they sell your car.
They should have a good internet presence, some local advertising, and a decent shop space to show the cars. In Washington, dealers are required to have a trust account that money paid for consignments goes into. You and the dealer are paid from that account (This is supposed to discourage mingling of dealer and customer money).
Again, THEY DON"T NEED YOUR SIGNED TITLE. Just make sure you're able to be contacted and can get them a title within 48 hours or so. Some customers go to Europe or Florida for a couple of months and forget to tell the dealer-this doesn't help get your car sold.
Stop by and see your car every few weeks if you can. Don't expect it to be front and center all the time, but if its in a dark corner, its probably not doing well. If you don't have decent interest or even flakes and dreamers trying to do deals, you're probably overpriced. If its been on the market for over 90 days, pull it off the market for a month or two, get it a new and better detail, maybe put those "better" wheels and tires on it, and reintroduce it to the market a month or two later. It might get another shot at being the "new girl at the dance". It's always a good idea to bring the car in fully detailed, and take care of all of those little things it needs. The people writing the check want to buy into the dream, and many lose their enthusiasm when they face the reality of making the blinkers self cancel, or any of the other laundry list of items. A clean engine compartment is probably second only to paint when it comes to wowing buyers and instilling confidence.
Good luck
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Great information. Thanks!