Consignment selling of vehicles

Last updated: 21 November 2024

Consignment selling is the process by which a licensed motor vehicle dealer agrees to sell a vehicle on behalf of a member of the public. The dealer then pays the former owner the sale proceeds less an agreed commission.

Approval for consignment selling - change to dealers licence

A dealer must be approved to sell motor vehicles on consignment. They must apply to have consignment sales (category E) added to an existing licence and prove they have sufficient resources to meet the obligations of Category E.

Obligations of consignment sellers

Dealers selling vehicles by consignment have certain obligations towards both the consignor (owner of the vehicle) and other third parties, including potential buyers.

Obligation

Description

Carry out instructions

A dealer has a strict obligation to carry out the instructions of a consignor.

Care, skill and diligence

In performing their actions as a dealer, a dealer must exercise care, skill and diligence.
For example, if a dealer notices an issue with the vehicle that the consignor has not mentioned, the dealer must make enquiries to determine if it is a problem that will need to be disclosed to potential buyers.

Best interests

A dealer has a duty to exercise their obligations and judgement in the best interest of the consignor.
For example, a dealer cannot suggest a lower price than has been advertised to a potential buyer because a vehicle has been on the lot too long and the dealer is prepared to take a lower profit to make space.

Conflicts (loyalty)

A dealer is not able to place their own interests, or anyone else’s, above the interests of the consignor.
For example, a dealer cannot cancel a consignment contract prior to paying a consignor to avoid the requirement to use a trust account (and therefore avoid paying audit costs).

Disclosure

A dealer must disclose to the consignor all pertinent information in regard to selling the vehicle.
For example, a dealer must communicate all offers made for the vehicle.

Delegation

A dealer is unable to delegate their power to act on behalf of the consignor to another party, unless the consignor provides authority for the dealer to do so.
While a dealer’s employees (salespersons) can act on the dealer’s behalf, the dealer cannot contract a third party to undertake the sale.

Trust accounts

A dealer who is planning to undertake consignment sales must ensure a consignment trust account is opened prior to accepting any vehicle on consignment.

Dealers should take particular notice of the requirements for payments into and out of the trust account. Management of trust accounts are covered in more detail on Auditing motor vehicle dealers page. 

Consignment agreement (contracts)

When entering into a consignment agreement with a member of the public, all contracts must be in writing and must contain all the below terms and conditions as required by the Motor Vehicle Dealers (Sales) Regulations 1974. The Motor Trade Association of WA standard consignment contract conforms to these requirements.

The agreement must make it clear what the settlement or net return will be for the consignor (owner of the vehicle).

A dealer must give a copy of the consignment agreement to the consignor immediately after it is signed by all parties.

Under the agreement, a dealer cannot charge the consignor for pre-sale repairs unless they have the consignor's prior written consent. The dealer must pay for any warranty repairs, which cannot be charged back to the consignor.

Consignment trust account handbook: Motor vehicle dealers

The handbook covers the responsibilities motor vehicle dealers have in managing their trust accounts. 

Trust account handbook

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