Consignment Contract Clauses to Read Before You Sign

The contract is the primary source. Whatever the dealer told you across the desk, whatever the website says about "seller-friendly terms," the signed page is what a court, an insurer or a lawyer will read if something goes wrong. So read it the way you would read any original record: line by line, assuming nothing, and noting what is missing as carefully as what is there. For how consignment fits among the other ways to sell, the bigger picture is laid out in our main guide. This article stays on the paper.

Term, renewal and the tail clause

Consignment agreements commonly run 60 to 90 days. The number itself is less important than what happens at the end of it. Look for three things.

First, renewal. Some agreements renew automatically for another full term unless you give written notice, sometimes within a narrow window before expiry. If the clause exists, put the notice date in your calendar the day you sign. If you would rather the agreement simply end, ask for that to be written in.

Second, the tail. A tail clause entitles the dealer to its commission if the car sells, within a set period after the agreement ends, to a buyer who saw it during the term. That is fair on its face; a dealer that introduced the buyer did the work. The problems are length and definition. Thirty to sixty days with a written list of introduced buyers is defensible. Six months with "any party who viewed the vehicle or its listing" is not, because it can sweep in a buyer you found on your own.

Third, exclusivity during the term. An exclusive agreement means the dealer earns its fee no matter who finds the buyer, including you. If you already have a likely buyer, a club acquaintance or a neighbor who has asked about the car for years, name that person in the contract as an exclusion before you sign. And if that buyer is serious, ask yourself whether you need a consignment at all; our where-to-sell guide compares a private listing, an auction and a dealer side by side.

Price authority and who decides

The agreement should state a minimum acceptable price as a dollar figure. Not "market value," not "a price agreed between the parties," a number. It should also state that the dealer cannot accept less without your written approval, and define written: email from your address, a signed form, whatever both sides will actually use.

Watch for clauses that give the dealer discretion to reduce the asking price after a set number of days, or to accept offers "within a reasonable range" of the minimum. A reasonable range is not a number. Also check whether the dealer, or anyone connected to it, is allowed to buy the car itself. Some agreements permit it. If yours does, it should require disclosure and your separate written consent, because a dealer buying at your floor price and reselling at retail is a conflict that the commission structure doesn't capture.

Finally, look at how fees are defined against that price. On a net-price agreement, where you name what you receive and the dealer keeps the difference, ask whether you will be told the final sale price. Some agreements require it. Some are silent, and silence usually means no.

Money: fees, expenses and how you get paid

Every charge should appear in the agreement or an attached schedule, with an amount or a formula. That includes commission, minimum fee, storage, detailing, photography, transport and any withdrawal fee.

The payout clause matters most. It should answer, in writing:

• Where the buyer's deposit and balance are held, and whether that is a separate trust or escrow account or the dealer's general operating account
• How many days after the buyer's funds clear you will be paid
• How you will be paid, and what deductions are taken before the payout
• What happens to a deposit if the buyer walks away, and who keeps it

"Promptly" is not a number. Some states regulate dealer consignment sales directly. California is the clearest example: a dealer taking a car on consignment from a private owner must use a written agreement containing terms set out in Vehicle Code section 11730, the car is delivered to the dealer "in trust," and the money due to you must be paid within 20 days after the sale. A dealer that fails to pay on time risks its license. Other states have their own rules, or none. Where a rule applies, it sets the floor, and the contract should not promise less.

Custody: title, insurance, mileage and condition

You keep the title until the sale closes. Some agreements ask for a signed title or a power of attorney at intake "to speed up closing." Decline. A signed title in a dealer's file is a car that can be transferred without you. Any power of attorney should cover one vehicle and one sale, signed at closing.

Insurance language is often thin. The agreement should name whose policy covers the car on the premises, in transit and on test drives, and the dealer should be able to hand you a certificate. Then call your own insurer. Some collector policies restrict coverage once the car is in someone else's custody, and you want to learn that before the car leaves, not after a claim.

That makes the mileage clause worth more than it looks. Record the odometer at intake, cap the miles allowed for test drives and moves, and state who may drive the car. Pair it with a condition report signed by both sides, with dated photographs attached. If the car comes back with a chip or a new noise, the report is the evidence.

Condition runs the other way, too. Many agreements include a seller representation: you warrant that the information you gave about the car is accurate, and you indemnify the dealer if a buyer claims otherwise. Read it narrowly. You should be warranting what you told them, not every statement the dealer later writes in the listing.

"People treat the agreement like a formality and the handshake like the real deal. It's backwards. The handshake is forgotten in a month. The paper is what's left, and it says exactly what it says."

Tom Ramirez

Getting out: termination, disputes and the signature page

Read the termination clause as if you will use it. Can you withdraw the car before the term ends? On what notice, and at what cost? A withdrawal fee calculated as a percentage of the asking price is the one to push back on hardest, because it grows with the price, and an optimistic asking price is often the dealer's own suggestion. Check the reverse too: when can the dealer end it, and what happens to fees already billed?

Then the dispute clause. Some agreements require arbitration, name a specific county for any legal action, or cap the dealer's liability at the commission amount. A liability cap that low means damage to a car worth tens of thousands is limited to a few thousand dollars. I can't tell you whether a given clause would hold up in your state. A lawyer can, and an hour of review costs little against a five-figure car.

Last, the signature page. Make sure every verbal promise has made it into the document or an addendum, that blank spaces are filled or struck through, and that you leave with a fully signed copy. Whether the dealer itself is worth signing with is a separate question, and that's covered separately. Once you have chosen both the route and the dealer, the agreement is where that choice either protects you or doesn't.

Sources and notes

• California Vehicle Code section 11729: consignment agreement required, payment within 20 days of sale
• California Vehicle Code section 11730: required contents of a dealer consignment agreement
• 49 CFR 580.17: odometer disclosure exemptions by model year
• Streetside Classics: consignment guide (90-day agreement)
• Classic Car Studio: consignment terms (90-day minimum term)

This article is general information, not legal advice. Consignment law differs from state to state; have a lawyer in your state review an agreement before you sign it.