Index
What exactly is consignment sale and how does it differ from direct purchase
How the process works step-by-step
Advantages for the dealership
Risks and limitations that need to be managed
How to set the commission and structure the agreement with the private seller
Taxation of consignment sales: VAT and Personal Income Tax (IRPF)
What documents are needed to operate correctly
When it makes sense to offer consignment sales and when it does not
Dealcar and managing consignment stock
Frequently asked questions
What exactly is consignment sale and how does it differ from direct purchase
In a direct purchase, the dealership acquires the vehicle from the private seller, pays the agreed price, and assumes ownership. From that moment on, the car belongs to the dealership: they decide the selling price, assume the risk of how long it takes to sell, and retain the entire margin when it is sold.
In a consignment sale, the dealership does not buy the car. They act as an agent for the private individual, managing the listing, lead handling, and the sales process in exchange for an agreed commission. Ownership remains with the private seller until the car is sold to a third party. The retail price can be set by the dealership (within a range agreed with the owner) and their profit is the difference between that price and the amount transferred to the owner, or an agreed flat commission.
The most relevant practical difference is capital risk: in consignment sales, the dealership has no money tied up in the vehicle. If the car does not sell, they lose nothing but time and management costs. If it sells, they collect the commission.
How the process works step-by-step
The standard consignment sales process has five phases.
The initial agreement between the private seller and the dealership defines the conditions: the minimum price the owner agrees to receive, the public listing price, the duration of the agreement, which expenses each party assumes (preparation, MOT if expired, listing fees), and what the dealership's commission or margin is.
See also how to source more cars from private individuals for your dealership.
Vehicle preparation involves getting it into presentation condition for sale: cleaning, photography, and inspecting its visible condition. If there are necessary repairs, it must be agreed with the owner who will cover them and how they affect the minimum price.
Listing and lead management is the dealership's usual work: listing the car on portals, handling inquiries, following up, and organizing viewings. The car can be physically on the dealership's lot or at the private seller's home, although having it on the lot makes viewings easier.
Closing the sale is formalized between the dealership (acting on behalf of the owner) and the final buyer. The invoice is issued by the vehicle owner, not the dealership, because the car has never belonged to the dealership at any point.
The settlement transfers the agreed price to the owner, minus the dealership's commission.
Advantages for the dealership
The main advantage is the expansion of visible stock without tying up capital. A dealership with 20 owned cars can have another 10 under consignment and present a catalogue of 30 units on listing portals without having purchased the 10 additional ones.
Consignment sales can also serve as a sourcing channel for cars that the dealership then buys directly if they see they sell quickly. If a private individual arrives with a car that the dealership does not want to buy at the requested price but could sell well, consignment is a way to test the market without assuming the purchase risk.
For dealerships that have operational capacity (sales team, portal presence, available lot) but want to optimize capital usage, consignment sales allow them to maintain activity with less investment in stock.
Risks and limitations that need to be managed
The most common risk is disagreement with the private seller regarding the selling price. Owners often value their car higher than the market rate, and when leads negotiate down, there can be conflict over whether to accept the offer or not. The initial agreement must make clear who makes the final decision on the minimum price and whether the dealership has room to close within a range without consulting the owner.
The second risk is vehicle availability. If the car is at the private seller's home and they use it daily, it may arrive for a viewing with extra mileage or in a condition that does not match the listing photos. Keeping it on the dealership's lot eliminates this problem but requires an agreement on insurance and liability during that period.
The third risk is time invested without return if the car does not sell. The dealership spends time listing, managing leads, and organizing viewings with no guarantee of getting paid. If the owner decides to withdraw the car from consignment before it is sold, that time is lost.
Read also how to calculate and monitor stock days at a dealership.
How to set the commission and structure the agreement with the private seller
There are two main models for structuring the dealership's remuneration.
The flat commission model sets a percentage or a fixed amount on the selling price, regardless of how much the car is sold for. The private seller knows in advance how much the service will cost and can calculate how much they will receive. The dealership has the same incentive to sell at the highest possible price because this improves the seller's experience and can generate referrals.
The guaranteed minimum price model establishes that the dealership transfers a fixed agreed amount to the private seller and retains as commission everything they achieve above that minimum. This is the model with the most incentive for the dealership (the more they sell for, the more they earn) but it can generate mistrust if the seller does not know the final price the car was sold for.
The duration of the agreement should be limited. An agreement with no expiry date can cause issues if the car remains unsold for months and the seller wants it back or wants to change the conditions. A period of 60 to 90 days with an option to renew is a reasonable timeframe.
Taxation of consignment sales: VAT and Personal Income Tax (IRPF)
This is the point that causes the most confusion and where the most mistakes are made. The tax treatment of consignment sales is completely different from direct purchase and resale.
In a consignment sale, the dealership is a commission agent. They do not buy the car or sell it in their own name: they manage the sale on behalf of the owner. The invoice to the final buyer is issued by the vehicle owner. The dealership issues a services invoice to the owner for its intermediation commission, with 21% VAT on that commission.
The REBU (special scheme for second-hand goods) does not apply to consignment sales because the dealership is not buying or selling the vehicle. The final buyer is indeed buying from a private individual (without VAT if the owner is an individual), which means that this buyer cannot deduct any VAT from the transaction.
Check out the complete guide to REBU for car dealerships.
If the dealership invoices the commission to the private owner (an individual with no commercial activity), the owner cannot deduct that VAT. The dealership does charge it and declares it in their quarterly VAT return (form 303).
What documents are needed to operate correctly
The consignment sales contract between the private individual and the dealership is the document that regulates the relationship. It must include the description of the vehicle, the agreed minimum price, the dealership's commission, the term of the agreement, who covers preparation and listing expenses, and early termination conditions.
The sales contract between the vehicle owner and the final buyer is signed by the owner, not the dealership. The dealership can act as an intermediary in the signing if they have a power of attorney from the owner, but the buyer's counterparty is the owner of the car.
Read also the legal guide to contracts in professional car sales.
The commission invoice issued by the dealership to the owner documents the service provided and is the basis for the VAT that the dealership charges.
When it makes sense to offer consignment sales and when it does not
Consignment sales make most sense when the dealership wants to expand its catalogue without increasing stock investment, when they have available operational capacity (team and lot) that they can leverage at no extra cost, or when they receive private sellers with cars they do not want to buy at the requested price but could sell if the market supports it.
It does not make sense when the dealership's business model is based on buying with a margin and consignment sales compete for the same team time with a lower expected return. Nor does it make sense when the owner has price expectations well above the market: in this case, the dealership invests time in a car that will not sell at the expected price.
The most common mistake is accepting cars for consignment at listing prices that are not competitive because the owner does not accept the market price. A car listed at a high price does not generate leads and consumes time with no return.
Also, consult how to do dynamic pricing using real market data.
More than 750 dealerships already use Dealcar to manage their daily operations
Dealcar allows you to manage consignment stock just like owned stock: portal publication, lead management in the CRM, and tracking days in stock.
Publish consignment stock to all portals from dealcar.io/stock-coches-multipublicacion.
Each vehicle's file records whether it is owned stock or consignment stock, which facilitates settlement to the owner at the close of the transaction.
You can see how it works at dealcar.io/software-concesionario or request a demo on dealcar.io.
Frequently asked questions
Does the dealership need the car's logbook to list it on portals?
Not necessarily to list it, but they do to manage it normally (delivering it to buyers, conducting test drives). If the car is physically on the dealership's lot, it is advisable to have the logbook available for any administrative steps that may be necessary.
Can the dealership apply the REBU if they sell a car they have on consignment?
No. The REBU applies when the dealership has bought the vehicle and sells it in their own name. In a consignment sale, the dealership is an intermediary and not the owner: they do not buy the car or sell it in their name.
What happens if the car is damaged while on the dealership's lot?
The liability for the vehicle during the consignment period must be defined in the contract. Usually, the dealership is responsible for damages that occur while the vehicle is in their custody, which means they must have that liability covered by their insurance or agree with the owner on how that risk is covered.
Index
What exactly is consignment sale and how does it differ from direct purchase
How the process works step-by-step
Advantages for the dealership
Risks and limitations that need to be managed
How to set the commission and structure the agreement with the private seller
Taxation of consignment sales: VAT and Personal Income Tax (IRPF)
What documents are needed to operate correctly
When it makes sense to offer consignment sales and when it does not
Dealcar and managing consignment stock
Frequently asked questions
What exactly is consignment sale and how does it differ from direct purchase
In a direct purchase, the dealership acquires the vehicle from the private seller, pays the agreed price, and assumes ownership. From that moment on, the car belongs to the dealership: they decide the selling price, assume the risk of how long it takes to sell, and retain the entire margin when it is sold.
In a consignment sale, the dealership does not buy the car. They act as an agent for the private individual, managing the listing, lead handling, and the sales process in exchange for an agreed commission. Ownership remains with the private seller until the car is sold to a third party. The retail price can be set by the dealership (within a range agreed with the owner) and their profit is the difference between that price and the amount transferred to the owner, or an agreed flat commission.
The most relevant practical difference is capital risk: in consignment sales, the dealership has no money tied up in the vehicle. If the car does not sell, they lose nothing but time and management costs. If it sells, they collect the commission.
How the process works step-by-step
The standard consignment sales process has five phases.
The initial agreement between the private seller and the dealership defines the conditions: the minimum price the owner agrees to receive, the public listing price, the duration of the agreement, which expenses each party assumes (preparation, MOT if expired, listing fees), and what the dealership's commission or margin is.
See also how to source more cars from private individuals for your dealership.
Vehicle preparation involves getting it into presentation condition for sale: cleaning, photography, and inspecting its visible condition. If there are necessary repairs, it must be agreed with the owner who will cover them and how they affect the minimum price.
Listing and lead management is the dealership's usual work: listing the car on portals, handling inquiries, following up, and organizing viewings. The car can be physically on the dealership's lot or at the private seller's home, although having it on the lot makes viewings easier.
Closing the sale is formalized between the dealership (acting on behalf of the owner) and the final buyer. The invoice is issued by the vehicle owner, not the dealership, because the car has never belonged to the dealership at any point.
The settlement transfers the agreed price to the owner, minus the dealership's commission.
Advantages for the dealership
The main advantage is the expansion of visible stock without tying up capital. A dealership with 20 owned cars can have another 10 under consignment and present a catalogue of 30 units on listing portals without having purchased the 10 additional ones.
Consignment sales can also serve as a sourcing channel for cars that the dealership then buys directly if they see they sell quickly. If a private individual arrives with a car that the dealership does not want to buy at the requested price but could sell well, consignment is a way to test the market without assuming the purchase risk.
For dealerships that have operational capacity (sales team, portal presence, available lot) but want to optimize capital usage, consignment sales allow them to maintain activity with less investment in stock.
Risks and limitations that need to be managed
The most common risk is disagreement with the private seller regarding the selling price. Owners often value their car higher than the market rate, and when leads negotiate down, there can be conflict over whether to accept the offer or not. The initial agreement must make clear who makes the final decision on the minimum price and whether the dealership has room to close within a range without consulting the owner.
The second risk is vehicle availability. If the car is at the private seller's home and they use it daily, it may arrive for a viewing with extra mileage or in a condition that does not match the listing photos. Keeping it on the dealership's lot eliminates this problem but requires an agreement on insurance and liability during that period.
The third risk is time invested without return if the car does not sell. The dealership spends time listing, managing leads, and organizing viewings with no guarantee of getting paid. If the owner decides to withdraw the car from consignment before it is sold, that time is lost.
Read also how to calculate and monitor stock days at a dealership.
How to set the commission and structure the agreement with the private seller
There are two main models for structuring the dealership's remuneration.
The flat commission model sets a percentage or a fixed amount on the selling price, regardless of how much the car is sold for. The private seller knows in advance how much the service will cost and can calculate how much they will receive. The dealership has the same incentive to sell at the highest possible price because this improves the seller's experience and can generate referrals.
The guaranteed minimum price model establishes that the dealership transfers a fixed agreed amount to the private seller and retains as commission everything they achieve above that minimum. This is the model with the most incentive for the dealership (the more they sell for, the more they earn) but it can generate mistrust if the seller does not know the final price the car was sold for.
The duration of the agreement should be limited. An agreement with no expiry date can cause issues if the car remains unsold for months and the seller wants it back or wants to change the conditions. A period of 60 to 90 days with an option to renew is a reasonable timeframe.
Taxation of consignment sales: VAT and Personal Income Tax (IRPF)
This is the point that causes the most confusion and where the most mistakes are made. The tax treatment of consignment sales is completely different from direct purchase and resale.
In a consignment sale, the dealership is a commission agent. They do not buy the car or sell it in their own name: they manage the sale on behalf of the owner. The invoice to the final buyer is issued by the vehicle owner. The dealership issues a services invoice to the owner for its intermediation commission, with 21% VAT on that commission.
The REBU (special scheme for second-hand goods) does not apply to consignment sales because the dealership is not buying or selling the vehicle. The final buyer is indeed buying from a private individual (without VAT if the owner is an individual), which means that this buyer cannot deduct any VAT from the transaction.
Check out the complete guide to REBU for car dealerships.
If the dealership invoices the commission to the private owner (an individual with no commercial activity), the owner cannot deduct that VAT. The dealership does charge it and declares it in their quarterly VAT return (form 303).
What documents are needed to operate correctly
The consignment sales contract between the private individual and the dealership is the document that regulates the relationship. It must include the description of the vehicle, the agreed minimum price, the dealership's commission, the term of the agreement, who covers preparation and listing expenses, and early termination conditions.
The sales contract between the vehicle owner and the final buyer is signed by the owner, not the dealership. The dealership can act as an intermediary in the signing if they have a power of attorney from the owner, but the buyer's counterparty is the owner of the car.
Read also the legal guide to contracts in professional car sales.
The commission invoice issued by the dealership to the owner documents the service provided and is the basis for the VAT that the dealership charges.
When it makes sense to offer consignment sales and when it does not
Consignment sales make most sense when the dealership wants to expand its catalogue without increasing stock investment, when they have available operational capacity (team and lot) that they can leverage at no extra cost, or when they receive private sellers with cars they do not want to buy at the requested price but could sell if the market supports it.
It does not make sense when the dealership's business model is based on buying with a margin and consignment sales compete for the same team time with a lower expected return. Nor does it make sense when the owner has price expectations well above the market: in this case, the dealership invests time in a car that will not sell at the expected price.
The most common mistake is accepting cars for consignment at listing prices that are not competitive because the owner does not accept the market price. A car listed at a high price does not generate leads and consumes time with no return.
Also, consult how to do dynamic pricing using real market data.
More than 750 dealerships already use Dealcar to manage their daily operations
Dealcar allows you to manage consignment stock just like owned stock: portal publication, lead management in the CRM, and tracking days in stock.
Publish consignment stock to all portals from dealcar.io/stock-coches-multipublicacion.
Each vehicle's file records whether it is owned stock or consignment stock, which facilitates settlement to the owner at the close of the transaction.
You can see how it works at dealcar.io/software-concesionario or request a demo on dealcar.io.
Frequently asked questions
Does the dealership need the car's logbook to list it on portals?
Not necessarily to list it, but they do to manage it normally (delivering it to buyers, conducting test drives). If the car is physically on the dealership's lot, it is advisable to have the logbook available for any administrative steps that may be necessary.
Can the dealership apply the REBU if they sell a car they have on consignment?
No. The REBU applies when the dealership has bought the vehicle and sells it in their own name. In a consignment sale, the dealership is an intermediary and not the owner: they do not buy the car or sell it in their name.
What happens if the car is damaged while on the dealership's lot?
The liability for the vehicle during the consignment period must be defined in the contract. Usually, the dealership is responsible for damages that occur while the vehicle is in their custody, which means they must have that liability covered by their insurance or agree with the owner on how that risk is covered.
