Selling a used vehicle on consignment
Consignment is a service agreement between you and the client. As a motor dealer, you must not sell on consignment for a client until they appoint you in writing.
The appointment to act sets out the rights and obligations of both parties. It must include:
- the services you will provide
- any limits or conditions
- the commission, fees and expenses that the client will pay you for your services.
You must fill out the appointment form before you provide any service. You and the client must sign and date the appointment form and give a copy to your client.
On the form, you will need to nominate the time frame of the appointment. It could be fixed or continuing.
You can enter a single appointment for a one-off service. This must have a fixed term.
To renew the agreement, you and your client must complete a new form. You must do this no more than 14 days before your expiry date.
A continuing appointment allows you to do several services for a client with no defined expiry date.
The agreement will need to set out:
- the time and date when you will carry out the services
- the reasons or situations for a service to take place.
You and the client can negotiate the commission. You will need to do this as part of your appointment.
However, you must not:
- increase the commission amount after the appointment
- keep a commission if you do not have a current licence
- take a commission where you have a beneficial interest.
You may end up in court if you keep commission that you are not entitled to.
If a court finds that you did keep commission that you were not entitled to, you:
- will have to return it to the consumer
- may be convicted of an offence.
You can transfer your appointments to another motor dealer if either:
- your original appointment lets you do so
- the client consents to it in writing.
End of appointment
An appointment might end because:
- the single appointment reaches its expiry date and is not renewed
- you and the client both agree on a date and time for the contract to end
- either party gives 30 days written notice that they intend to end the appointment.
The client always has the right to withdraw their vehicle from sale.
You must have a trust account if you intend to sell on consignment.
Making a sale
If you sell a vehicle on consignment, you must:
- deposit the money in your trust account
- give the buyer a trust account receipt
- wait until the transaction is finalised before withdrawing anything
- withdraw and pay the client (or any other relevant party) their share of the proceeds first
- only withdraw your commission after paying out the client and all other parties.
You also need to use a trust account when you take money from a client for future use. You must not keep a commission on expenses.
This must be:
- done for a specific purpose
- set out in the appointment.
The purpose might be:
- advertising and marketing
- running a relevant search
- cleaning and detailing the vehicle.
You don’t need to use the trust account if:
- the client did not pay for an expense in advance
- you paid for it by using your own money
- the client had authorised the expense in advance
- you are only reimbursing yourself for that authorised amount.
You can not accept a trade-in when you sell on consignment. You can still buy the vehicle, but it must be as part of a separate transaction.
Signage and advertising
You must tell your customers that consignment vehicles do not have a cooling-off period. You must also state whether a statutory warranty applies.
When offering the vehicle for sale, you must:
- include a statement in any advertisement
- display a sign on the vehicle.
You will need:
- a statement in your advertising
- a single sign for the premises if you only sell by consignment
- an individual sign on each vehicle if you sell both directly and on consignment.
If you have a single sign, you may also need individual signs about statutory warranty (if this varies).
These provisions do not apply if you are selling on behalf of another motor dealer or an auctioneer.
When you advertise a vehicle, you must state the following:
No cooling-off period applies.
If you only use a single sign, it must state the following:
Vehicles on these premises are not subject to a cooling-off period.
You must also:
- make sure that it applies to every vehicle with no exceptions
- place the sign at your main entrance (this will usually mean the main entrance of your office)
- make sure that it’s clear, readable and easy to see
- use letters that are at least 10cm tall.
The individual sign will need to clearly state the following:
No cooling-off period—For sale by consignment
An individual sign must clearly refer to a specific vehicle. It might be:
- written on the windscreen
- attached to the vehicle
- next to the vehicle.
In any of these cases, the information on the sign must:
- be close to the price of the vehicle
- be clear, readable and easy to see
- use letters that are each at least 5cm tall.
Before they sign a contract, you will need to advise the potential buyer:
- that no cooling-off period applies
- if any statutory warranty applies.
To do this, you must:
- fill in the approved form before you sign a contract
- give the buyer a copy of the approved form.