Top 10 Reasons Dealers Source Vehicles on Consignment

When it comes to sourcing inventory, vehicle consignment offers retail car dealers a myriad of unique benefits. From reducing costs and market risk to increasing customer satisfaction and retention, here are the top eight reasons retail dealers choose to source some of their vehicles on consignment:

Get Free Inventory

One of the most appealing aspects of retail vehicle consignment is the opportunity to get free high-quality inventory without any capital outlay, floorplan expense, auction fees, transport costs, and without holding cost. Essentially, dealers can expand and diversify their inventory without tying up significant financial resources, allowing for more flexibility, better cash flow management and profitability.

Turn Reconditioning Into Revenue

Retail consignment allows dealers to turn vehicle reconditioning into a profitable endeavor. Private sellers pay the consignment dealer to perform frontline get-ready reconditioning, maintenance, and repairs prior to listing them for sale on their lot. This not only ensures that all vehicles on the dealer's lot are consistently in top condition for sale, but also generates additional revenue for the dealership's fixed operations and income statement.

Reduce Market Volatility

In a volatile market, vehicles sourced on consignment can be a significant game-changer. Price adjustments and inventory aging affect the private seller, not the dealer. This means that dealers make money on consiged vehicles regardless of market fluctuations, providing a more stable and predictable revenue stream based on sale commissions (fixed or variable).

Improve Inventory Mix

Retail consignment gives dealers access to a diverse range of vehicles, including rare, hard-to-find cars, low mileage cars, one-owner cream puffs, fast-selling models, and highline vehicles. This improved inventory mix can attract a broader buyer base and increase overall sales opportunities.

Lower Inventory Turn Time

With consigned cars, dealers are able to use a more aggressive list pricing strategy (called "Triple-Win" - i.e. all three parties get a win - buyer, seller and dealer) which drives additional buyer traffic to their dealership. This results in a lower inventory turn time overall, meaning cars are sold more quickly, and dealers can move on to new inventory faster.

Double Seller Conversions

By accepting private party cars on consigmment, dealers can offer their customers more options for selling their vehicle. For example, a consignment-sourcing dealer is uniquely positioned versus its competitors to offer its sellers a traditional Instant Cash Offer/Trade-in Allowance as "Door #1" and offer them the Retail Consignment option as "Door #2." This enables the seller to decide which option is best for them based on their own situation. Sellers are more likely to "pick a door" and the dealer gets their car for inventory either way. This not only increases the chances of converting sellers but also enhances their overall experience and loyalty.

Increase Customer Retention

Dealers that offer the retail consignment option create two happy customers for every car sold – the buyer and the seller. Dealerships that offer more options and flexibility are preferred by customers, leading to higher retention rates and more repeat business. People naturally prefer to do business with companies that offer multiple options and are perceived as looking out for the customer's best interest (consumer advocate approach).

Earn Good Money

Finally, consignment guarantees sale commissions, other revenue, and profits on every "consigned" car sold, which can not always be said for vehicles "acquired" from auctions or private party sellers. This makes it a lucrative and sustainable business model. Dealers accepting cars on consignment earn income from sale commissions (fixed or percent of sale), reconditioning revenue, F&I Income, trade-ins profits, etc. The Gross Profit Per Unit (GPU) for "consigned-sourced" vehicles are typically as much, if not higher than "owned-sourced" vehicles from auctions, or from Instant Cash Offers, Trade-Allowances (i.e., in-house Vehicle Buying Centers).

Integrates Easily

Retail vehicle consignment provides numerous and sizable advantages for dealers, from cost savings and revenue generation to improved customer satisfaction and inventory management. Embracing and implementing a retail consignment program can be a a fast and easy strategic move that drives growth and profitability for any retail dealership.  The secret is to integrate this customer-friendly option into your overall vehicle sourcing strategy.

For more information, and to get started with free dealer training and support from Retail My Ride:

- Visit our dealer info website at: SourceFreeCars.com

- Call us at:  833-795-2277 (CARS)

- Email us at: [email protected]