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.
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Delus Johnson-Lead Instructor Automobile Dealer
Training Association