Ways to Protect a Consignment Vehicle

The old-car marketplace seems to be on a positive trend. People seem to be investing in the cars they’ve always wanted, rather than putting the purchase off until tomorrow. With marketplace activity unfolding, some collectors are deciding to “cash out” by consigning their cars to dealers. If you’re considering this, be sure to make the consignment arrangement carefully.

A few years ago, the lawyers involved in a fraud case against a vintage sports car dealer, who was selling the same cars to more than one buyer, said that most people selling goods on consignment are reputable. However, the lawyers suggested two important steps that car collectors could take to protect themselves in a consignment-sale situation:

• Before consigning something valuable to an individual or dealer, file a security statement with your state’s banking or financial institution’s regulatory agency. Be sure that the seller’s lender gets a copy of the security statement. Don’t turn over the item to anyone before doing this.
• Go to a courthouse and make a background check on the seller or dealer. In particular, make sure that he or she isn’t involved in any lawsuits or being hounded by creditors.

Automotive writer and auction reporter Phil Skinner also sees consignment sales picking up. Skinner said, “With the current market being very strong, it is only natural that a number of new classic-car traders will be looking for the quick buck. While some may have good intentions when taking a car to sell on a consignment basis, a lack of experience in business or in proper representation of other’s property could lead to disaster.”

According to Skinner, don’t be afraid to ask a consignment dealer for references from previous clients, as well as from those who have purchased the type of car you have. Ask the people you talk to how the transaction went. Were there any problems with the paperwork or in making arrangement for transportation of the car?

Skinner says that when consigning a vehicle, never give up the actual title to the car. “If the consignor demands to have the title, double-check his credentials and ask him to accept a photocopy of the original title,” says Skinner. (Editor’s note: As noted below, some states may require you to give the dealer your title.)

“If the vehicle is going to be out of your control, such as on display at an exposition or in a dealer’s showroom, check with your collector car insurance company about liability coverage,” Skinner warns. “Remember, in most states the insurance follows the car regardless of who is driving it.”

According to Skinner, prior to giving your car to a dealer, take photos of it; any claims of damage or abuse will be put to rest with such evidence. Document the date by using a current newspaper in the photo or with a date-stamped videotape.

Ask a fair price for the car you’re consigning. “The market is going up by leaps and bounds on some models,” Skinner points out. “But realistic pricing will help sell a car. Lately, I’ve seen offers 20–25 percent above 2004 levels turned down by sellers with unrealistically high hopes.”

Skinner’s final advice is, “If you’re serious about selling, do a little research, work with the consignor and take the precautions listed above. Also, be sure you clearly understand all details regarding listing fees, commissions and the reimbursement of promotional expenses you may be liable for.”

Martin Godbey looks at dealer consignments from a different point of view, as he performs consignments and sells collector cars at Vintage Motors of Sarasota in Sarasota, Florida. “There are many good reasons for using the services of a qualified dealer,” Martin believes. “A dealer will be more seasoned at qualifying prospects regarding both their intent and their finances.

According to Godbey, a dealer may be able to facilitate a trade to cash a seller out of unwanted property. He says that buyers often prefer purchasing cars from a professional dealer who can be held accountable for the transaction.

“Taking a chance on an unknown seller in a remote locale can be scary,” Martin points out. “Most dealers have showroom hours and are accessible. Dealers have taken on the burden of overhead, and most are effective and credible sellers offering assistance with financing, insurance and vehicle transportation. Many dealers offer an enclosed showroom, a pre-existing client base, an active website and the use of established avenues of advertising. There is another concern. What classic car owner wants strangers coming to visit?”

Godbey acknowledges that someone interested in selling a car through the consignment method should be concerned with the ability of the chosen dealer and the safety of his own automotive investment. “The best way to determine the dealer’s credibility is to talk to others in the hobby,” says Martin. “Ask around. How long has the dealer been in business? The longer, the better. Many dealers have a significant investment in inventory and showroom property. Does the dealer typically handle your type or price range of classic car? A quality dealer should be able to secure a good price for a high-quality car.”

In regard to the safety of the consignor’s property, Martin says the car owner must determine if the dealer is trustworthy. “Most are state-licensed, and bonded and insured by regulatory requirements,” Godbey said. “Check the dealer’s reputation. Check to see if the car will be stored inside or outdoors. Check to see if the dealer’s property is fenced in.”

As far as security, Godbey said that even reputable dealers are only “sometimes agreeable” to letting a seller retain title documentation in lieu of payment. “Some states, such as Florida, require dealers to be in possession of titles from consignors,” he noted.

Consigning your car to a dealer can be a wise decision – if you take all the necessary precautions to make sure that your agent is trustworthy. Researching will take some work, but it’s worth it to make sure your selling experience is a happy one.

The process of buying and selling collectible cars is a significant facet of the hobby. Hagerty likes to work with its customers to help minimize potential loss and make sure proper coverage is in place. Sellers should always carry agreed value, full coverage insurance on their vehicle. As well, vehicles should always be stored inside while on consignment. Look for adequate security and protection, such as fire and smoke alarms, fire extinguishers and sprinkler systems. Buildings should be in good condition with secure locks and fencing if appropriate.

Sellers should discuss how the dealer handles test drives. We recommend that a sales person always be present and that test drives be kept to a minimum. Typically, most reputable collector car dealers will only do a test drive once the final sales price has been determined and a deposit has been made. Last, ask the dealer if they carry bailees’ insurance coverage. This coverage protects the dealer for his negligence while consignment vehicles are in his care, custody and control. Adequate bailees’ coverage limits are indicative of a professionally run dealership.

John “Gunner” Gunnell is the automotive books editor at Krause Publications in Iola, Wis., and former editor of Old Cars Weekly and Old Cars Price Guide.