Are Vehicle Consignments Right For Your Texas Dealership?

Texas Dealer Consignments

I wanted to talk about some recent dealership news with the expansion of a company called CARLOTZ.

If you are familiar with CARLOTZ, they are an up and coming nationwide dealership that has recently expanded its dealer operations in Texas.

CARLOTZ operates a little differently than most Texas Dealerships in that is focuses only on consignments. So instead of a typical Texas dealer that gets licensed buys most of the vehicles at a dealer auction, or maybe from individuals, and then sells them on the lot, CARLOTZ, charges customers to display the customer’s vehicles on the lot, then charges the customer an additional fee to sell the vehicle on the lot.
CARLOTZ has seen a dramatic increase in revenue in the State of Texas and I would like to talk about whether or not this new sales model will work for you.

I have been doing some research on this particular company CARLOTZ, and they have been growing by leaps and bounds.CARLOTZ has locations in Bakersfield and Los Angeles California, Denver Colorado, Clearwater, Merrit Island, and Tampa, Florida, Atlanta Georgia, Chicago Illinois, St. Louis, Missouri, Charlotte and Greenesville North Carolina, Nashville Tennesee, Charlottesville, Cheaspeake, and Richmond Virginia, Seattle Washington, and they have Recently Expanded Operations in Texas with locations in San Antonio and Dallas.

What has lead to the rapid expansion of CARLOTZ in Texas?

We are going to talk about that. Every dealer needs to prepare in the rapid change in our customers buying habits. More and more of our customers are no longer wanting the buy a car the old fashioned way. What do I mean by the old fasion way. Well the process of a customer coming into your dealership, kicking the tires on the lot, taking the test drive, setting down with you in your office and going through a long back and forth time consuming negotiation process is becoming the OLD FASHIONED way of purchasing a vehicle.

Our buyers have a new mindset. Our buyers are educated. They are doing an incredible amount of research before they ever step onto your lot. And more and more of our customers want the buying experience to take place entirely online.

As a reminder, I you are updating your sales process to a online experience, you must remember that all Texas dealer's retail sales activity must take place at your licensed retail location. So you must sell the vehicle on the lot before taking the vehicle to the customers home. You almost have to hook up with a financing company that will allow your customers to apply for and be approved for a loan before delivering the vehicle to the customer. Be sure to show a papertrail that proves the sale took place, ON THE LOT before delivering the vehicle to the customer.

In the past I have done a handful of consignments on my lot by they were a real pain. So think about the old model of doing a consignment sale on your lot.

Lets say John Dow approaches you about selling his car on your lot. That is great, but you must have some type of written permission to sell the vehicle so John Doe has to sign a form stating that you have permission to sell his vehicle on the lot.

Then you must contact your dealer insurance company to make sure you dealer insurance company covers consignments. Many insurance companies will require and additional rider that covers consignments. Some insurance companies strictly prohibit any type of consignments whatsoever, so before you explore the possibility of consigning vehicles on you lot, it is imperative that you contact your insurance company to ensure they allow you to consign vehicles on your lot.

So once you have ensured your insurance company allows consignments and you have obtained the written permission that is required by the customer, you display John Doe’s car on your lot, and then Sally Doe, sees John Does car on your lot and wants to buy it. And by the way John Doe and Sally Doe are not related, they just happen to have the same last names. Quite the coincidence. Huh?

When Sally Doe has decided to purchase John Does car you must have John Doe bring the title to the lot, then sign the title over to your dealership, then you must sign the title over to Sally Doe. Remember you can never have a incomplete, or what is known as a blank title, you must have all reasigments complete. So you basically have the buyer and the seller in the same room doing the paperwork. And while John and Sally are doing the paperwork both parties are very aware of the large profit you just made. Then they both decide to start a dealership, Sally Doe opens a lot next door to you and John Doe opens a lot across the street.
Now this is how I did consignments in the past but I think companies like CARLOTZ have really improved this method.
CARLOTZ operates with a great concept. They charge anyone that wants to display a vehicle for sale on the lot a $299 listing fee and then they charge another $799 when the vehicle sells.

Think about this sales model for a moment. If you start a dealership, or expand your currently licensed dealership and specialize in consignments, you have zero dollars invested in your inventory. Once again, you have ZERO dollars invested in your inventory. No Floor Plan, No Interest Rates Paid on the Floor Plan. No Floor Planner telling you what you can and cannot do with your inventory.
According to the Dallas Morning News CARLOTZ bills itself as “the nation’s largest consignment-to-retail used car marketplace.” Sellers bring their cars to CarLotz, which determines the selling price then creates an online listings for the vehicle. CarLotz also displays the vehicle for sale on one of its lots, they allow test drives then complete all the paperwork of the sale.

Once the vehicle is sold, sellers receive the money from the sale. The company charges sellers a $299 listing fee to inspect, photograph and market the car, as well as a $799 fee” once the car is sold.
Its $50.8 million in net revenue from April to June of this year represented a 92% increase from the same time period in 2020. I want to repeat that, Its $50.8 million in net revenue from April to June of this year represented a 92% increase from the same time period in 2020.

CARLOTZ has taken the concept of consigning vehicles for sale to the next level and obviously they are doing it right. I mean think about the net profits this company is achieving.

Is it time for you to start expanding your Texas dealer consignments? Maybe so.

Dealers have to be aware of the multitude of changes that are occurring in our industry. We have to prepare for these changes or we are going to be left in the dust.
Thank you very much for listening to the Dealer Training Podcast, if you found value in this podcast I would ask that you please subscribe and share this podcast with other dealers that you think can benefit from the information, Good luck with the operation of your dealership.

We are approved by the Texas Department of Motor vehicles to provide you mandatory 6 hour dealer pre-license course, so when you are ready to make the move, click on blue Enroll Now button.

We are here to help you start your Texas motor vehicle dealership!

Texas Dealer License

Delus Johnson-Lead Instructor
Automobile Dealer Training Association