Insights

Selling a car on consignment or buying it in? Differences in liability, contracts and records

Consignment or buying in? Differences in ownership, tied-up capital, liability for defects, the consignment agreement and recording consignment cars.

Key findings

When buying in, the dealer purchases the car, pays the purchase price and bears the risk of selling it for less. On consignment, the car remains the owner's until it is sold. The dealer does not finance the purchase price and earns the agreed commission.
If the dealer sells a consignment car in its own name, the buyer brings claims for defects against the dealer. How the dealer settles up with the owner is determined by the consignment agreement.
The consignment agreement sets the asking price and the minimum price, the commission and the consignment period. It also specifies who pays for reconditioning and advertising, even if the car does not sell, and when and how much the owner receives.
Buying in suits you when you want to control reconditioning and pricing yourself and have the capital to purchase the car. Consignment suits you when you do not want to tie up capital and the owner accepts price limits and rules on costs.
Consignment cars belong in the same sales process as your own stock, but with a link to the owner, the agreement and the obligation to pay out. Omnetic Used Car Sales manages used car sales from buying in or consignment through to handover and accounting.

Selling a car on consignment means that a dealership or used car dealer sells a used car on behalf of its owner and receives a commission for the sale. This widens the range on offer without the dealer having to buy every car into its own stock. There is no less work involved, though: the car has to be taken in, reconditioned, advertised, shown to customers and settled after the sale. Compared with buying in, what mainly changes is who owns the car, who finances the purchase, who decides on the price and who is liable to the buyer. The process therefore starts with choosing the contractual model, not with publishing an advert.

How does selling a car on consignment work and how does it differ from buying in?

When buying in, the dealer concludes a purchase agreement with the current owner, becomes the owner and then sells the car as its own. On consignment, it concludes a consignment agreement: it arranges the sale in its own name on behalf of the owner and receives the agreed commission for doing so.

Consignment must be distinguished from brokering. In a brokered sale, the dealer only finds a buyer and the owner concludes the purchase agreement directly. Each model creates different contractual relationships, different liability and different documents. The words "consignment sale" in an advert do not determine the model. The comparison below assumes consignment in which the dealer sells in its own name.

Area	Buying in	Consignment
Relationship with the current owner	The dealer is the buyer and must pay the purchase price.	The dealer arranges the sale and accounts for it to the owner.
Ownership	The dealer acquires the car under the purchase agreement.	The car remains the owner's until it is transferred to the buyer.
Tied-up capital	The dealer finances the purchase and reconditioning.	The dealer does not finance the purchase price but often pays for reconditioning and advertising up front.
Changing the selling price	The dealer decides according to its own commercial rules.	The dealer must stay within the limits and authority agreed with the owner.
Commercial result	The difference between the selling price and the purchase price, less costs.	The commission, less the costs borne by the dealer.
Liability to the buyer	The dealer, as the seller.	The dealer, if it sells in its own name. It then settles up with the owner under the agreement.
Unsold car	Remains with the dealer, along with further price risk.	Goes back to the owner or stays on offer as agreed. The costs incurred are settled.
Money after the sale	The dealer closes its own deal.	The dealer separates its commission, the agreed costs and the amount due to the owner.

Consignment saves capital for purchasing, not sales capacity. A consignment car takes up space on the forecourt, salespeople's time and workshop time. Without rules on costs, a dealership can recondition and advertise a car, the owner can then withdraw it from sale and the costs remain with the dealer.

In Omnetic, consignment cars are managed by the same module as cars bought in. Used Car Sales manages used car sales from buying in or consignment through reconditioning and advertising to handover and accounting. Reconditioning, advertising and settlement are thus linked to a single vehicle record, not to a separate consignment spreadsheet.

Who is liable to the buyer for defects?

The first question is: who is the seller in the purchase agreement? The advert, the purchase agreement, the payment documents and the complaints procedure must all match the answer.

If the dealer sells in its own name, the buyer brings claims for defects against the dealer. The salesperson therefore cannot turn the buyer away by saying the car was on consignment and they should contact the owner. Settling up with the owner is a separate relationship governed by the consignment agreement. When a consumer buys from a business in the EU, they are protected by the seller's legal guarantee. For new goods, it applies for at least two years from delivery. For used cars, the rules vary by country.

The legal framework for consignment varies from country to country. Example from Germany: under Section 383 et seq. of the German Commercial Code (HGB), the commission agent (Kommissionär) sells goods in its own name for the account of the principal (Kommittent), the person who has entrusted the sale to it. The commission agent is therefore the buyer's contractual partner. The car entrusted on consignment remains the principal's property until the buyer acquires it.

In addition to the commission, the consignment agreement therefore needs rules for:

the information the owner provides about the car's history, repairs and known defects;
recording the car's condition when it is taken in;
communication in the event of a complaint and approval of related repairs;
splitting costs between the dealer and the owner.

The owner's declaration is no substitute for an inspection. CarAudit carries out the inspection right next to the car using a configured checklist. It marks damage on a body diagram with photos and saves the report to the vehicle record in DMS Core. The same inspection can be carried out when an unsold car is returned, so any dispute about damage that occurred during the consignment has a clear starting point.

A fault found during reconditioning must change the description of the car's condition in the listing, the scope of the repair or the terms of sale. It must not remain only in a workshop job that the salesperson does not see when closing the deal.

What should a car consignment agreement contain?

The agreement must cover the whole deal, including what happens if the car does not sell. Disputes most often arise over discounts, paid reconditioning and the amount the owner expects after the sale.

Area of the agreement	What to agree	What problem it solves
Contractual roles	Who the owner is, who arranges the sale and who concludes the purchase agreement with the buyer.	Inconsistency between the advert and the contracts.
Vehicle identification	VIN, accessories, number of keys, documents handed over and a reference to the condition report at intake.	Mixing up cars or a dispute about what the dealer took over.
Price and discount	Asking price, minimum approved price and who may grant a discount.	A sale below the owner's limit.
Commission	A fixed amount or the method of calculation, the basis of calculation and the point at which it becomes payable.	Differing interpretations of the commission.
Reconditioning and advertising	Work included in the commission, separately charged items and approval of further expenses.	Repairs the owner refuses to pay for.
Term and termination	Consignment period, extension, withdrawal from sale and return of the car.	An unclear procedure if the car does not sell.
Care of the car	Use, test drives, storage and procedure in the event of damage.	A dispute about damage occurring during the consignment.
Settlement	Flow of money, condition for payout, deadline and permitted deductions.	Premature or incorrect payout to the owner.
Defects and subsequent claims	What the owner disclosed about the car and how the parties will split the costs of a complaint.	Costs that arise after the deal is completed.

For the price, it must be clear whether it is the price for the buyer or the amount the owner will receive after deducting the commission and costs. The sentence "the owner requires this amount" allows two different calculations. The safe approach is to set out the calculation directly in the agreement: amount due to the owner = price paid by the buyer − dealer's commission − costs payable by the owner under the agreement.

It is easier to agree a price limit with the owner when they can see what the price is based on. Price Report uses active listings and completed sales on the market to determine a recommended used car price, the expected time to sell and a traceable set of comparable vehicles. The expected time to sell also serves as a basis for the length of the consignment.

The outcome of an unsuccessful sale is just as important. Valeting, diagnostics, repairs and paid advertising are incurred before any entitlement to commission arises. The agreement should specify which of these costs the owner will pay even if the car is returned. In Germany, Section 396 HGB entitles the commission agent to the commission and, by reference to Sections 670 and 675 of the German Civil Code (BGB), to reimbursement of expenses, including the use of its storage space and transport. For day-to-day operations, an explicit list of included and separately charged items is still better.

How to keep consignment cars separate from your own stock?

Separate records do not mean a second spreadsheet with no link to sales and the workshop. For every car, the contractual model must be clear from the outset, with a traceable link between the agreement, the work, the payments and the settlement.

1. Determine the contractual model at intake

From day one, the record must distinguish between owned and consigned cars. The fact that a car is on the forecourt says neither who owns it nor how it will be treated in the accounts. Intake is carried out by an authorised member of staff, and the terms of the listing are approved by the sales manager. The accounts team learns about the contractual model before the first document is issued.

2. Attach the agreement and the initial condition

The owner's details, the agreement, the condition report at intake, the agreed accessories and the current location all belong to a single VIN. The owner's contact details are kept separate from those of prospects and the eventual buyer. In a stock audit, consignment cars are physically counted like all the others, but they appear in the stock list separately from the dealer's own assets.

3. Assign a payer to every cost

The workshop job distinguishes between work included in the commission, work paid for by the owner and the dealer's costs. An additional repair needs the owner's recorded consent, not just verbal approval passed on by the salesperson. The same applies to a price change: the record keeps the original limit, the new agreement and the name of the person who approved the change.

4. After the sale, separate revenue from settlement

The dealer cannot freely use the buyer's payment. The records must show how much is due to the owner, how much is commission and which costs the agreement allows to be deducted. In Germany, under Section 384(2) HGB, the commission agent must report the execution of the sale, account for it and hand over to the principal everything it obtained from the transaction. The settlement therefore combines the agreed price, the payment received, the commission, the approved costs and the resulting amount to be paid out.

5. Close the deal only once the owner has been paid

The status "sold" is not enough. The deal is complete only when the documents and payments have been dealt with, the settlement is finished and the owner has received their money. Until then, the obligation to the owner must remain visible, even if the car has already left the site.

Commission, margin and VAT: how consignment and buying in differ

When buying in, the dealer tracks the selling price against the purchase price and reconditioning costs. On consignment, it tracks the commission against the costs it bears under the agreement. In both models, unaccounted-for reconditioning or an additional repair can spoil a deal that looks good.

Commercial margin and margin for VAT purposes are not the same thing. According to the European Commission, the special scheme for second-hand goods taxes the dealer's margin. However, it applies only when the specified conditions are met. The fact that a car is used or on consignment does not in itself determine the scheme. How a consignment sale is treated for VAT varies by country and by the status of the owner. The accountant therefore needs to know the contractual model, the status of both parties and the related documents. Setting this up for a specific market is a matter for an accountant or tax adviser in the country concerned.

When does consignment make sense and when does buying in?

Buying in gives the dealer freedom over reconditioning and pricing but requires money for the purchase. Consignment does not require capital but adds ongoing negotiation and settlement with the owner.

Situation in day-to-day operations	Suitable model	What to settle before intake
The dealer wants to control reconditioning, discounts and the sale itself.	Buying in	The purchase price, the reconditioning budget and responsibility for the deal.
The dealer does not want to tie up capital and the owner accepts the agreed scope of services.	Consignment	Commission, price limits, costs and termination rules.
The car is outside the usual range or the owner insists on a price at which the dealer would not buy it in.	Consignment for a fixed period	The minimum price, the length of the consignment and the costs if the car is returned.
The scope of reconditioning is unknown and the owner does not want to approve further expenses.	Neither for now	First determine the scope of work, who will pay for faults found and what happens if the car does not sell.

Selling a used car on consignment makes sense when the commission covers the dealer's work and risk. A lower capital requirement does not outweigh unclear liability or an owner who refuses necessary reconditioning.

Watch out

A different seller in every document. When the advert, the purchase agreement and the invoice name different sellers, the buyer does not know whom to contact, and the dispute becomes about who is liable for the car.
A consignment car recorded as the dealer's own asset. The fact that a car is on the forecourt does not mean it belongs to the dealer. Incorrect recording shows up in the stock audit and in the annual accounts.
A repair with no designated payer. The workshop carries out the repair, the owner refuses to pay for it and the cost stays with the dealer.
Paying the owner before the payment is received. A dealer who pays the owner on the strength of a buyer's promise bears the risk that the payment never arrives.
New damage without a record. Unrecorded damage from a test drive or on the forecourt only comes to light when the car is returned or in a complaint.

Omnetic: the consignment car, reconditioning and settlement on a single record

A consignment deal is hard to manage when the agreement sits with the salesperson, the repairs in the workshop system and the amount to be paid out in a separate spreadsheet. Omnetic replaces these separate records with a single cloud platform.

Used Car Sales manages consignment cars and cars bought in through the same process: from buying in or consignment intake through reconditioning and advertising to handover and accounting.
DMS Core holds a single shared record of the vehicle, customer, jobs and money. The agreement, the inspection report, the workshop job and the settlement are linked to the same car and are not re-keyed between modules.
Accounting links every document from sales, the workshop, the warehouse and the bank to the car, branch and job. Bank transactions are loaded or imported and matched with documents, so you can see whether the buyer has paid and what remains to be paid out to the owner. Anyone who wants to keep their own accounting system can pass entries to it from Omnetic via an integration agreed for the market concerned.

Book an Omnetic demo focused on consignment sales, from taking in the car to settling with the owner.

FAQ

Can the owner keep using the car during the consignment?

Only if the agreement expressly allows it. The business then needs to know when the car is available for viewings and must record the current mileage and condition after each return. Any further use may change the details in the advert.

Can a consignment sale be switched to buying in along the way?

Yes, but it requires a new purchase agreement and settlement of the costs incurred so far. Changing the status in the records is not enough. The car's condition, the new terms and the related accounting documents must be recorded as at the time of the change.

What if the car is brought in by the owner's employee or another authorised person?

The records must distinguish between the owner, the person handing over the car and the person authorised to approve the commercial terms. Someone who may bring the car in is not necessarily authorised to sign the agreement or approve a discount.