In many showrooms, a large share of the cars on display don't belong to the showroom. An owner wants to sell without the hassle, so they leave the car at the showroom for a commission. This is consignment selling.
The showroom gains clearly: profit without paying for the car. But consignment also causes more disputes than anything else: "What did you sell it for?", "Why less than we agreed?", "Where is my share?". Most of these disputes have one cause: an unwritten agreement and mixed-up money.
Consignment vs Brokerage: What's the Difference?
| Consignment | Brokerage | |
|---|---|---|
| Where is the car? | In your showroom, where visitors see it | With its owner; it never enters your showroom |
| Your role | Display and sell it on the owner's behalf | Bring seller and buyer together |
| Who receives the price? | Usually you, then you pay the owner their share | The seller directly; you take your commission |
| Commission from whom? | The owner (seller) | The seller, the buyer, or both |
The simple rule: if the car will stand in your showroom, it is consignment; if your role is calls and meetings without holding the car, it is brokerage.
How Much Commission Does a Showroom Take to Sell a Car?
This is one of the most searched questions, and there is no single figure. Commission varies by country, city, the car's value and how fast it is expected to sell. It is usually set one of two ways:
- A percentage of the sale price: grows with the car's value. Suits higher-value cars.
- A fixed amount: the owner knows it upfront whatever the price. Suits cars of similar value and is clearer for the owner.
What matters isn't the number so much as having it written down before you take the car, not agreed verbally after it sells.
What a Consignment Agreement Should Include
- Owner and car details: make, model, year, chassis number and mileage at handover.
- Term: a start and an end date. A car with no term can occupy your showroom for months, taking the place of a car that earns you money.
- Commission: a percentage or a fixed amount.
- Minimum price: the lowest amount the owner accepts. Never sell below it without their written consent.
- Condition at handover: a documented inspection that protects you if the owner later claims damage happened at your showroom.
- What happens at expiry: renew, lower the price, or return the car to its owner.
The Biggest Mistake: Mixing Consignment Money with the Showroom's
When you sell a consigned car for 30,000 and your commission is 1,500, 28,500 isn't yours. It is money you owe the owner from the moment you collect it. When the whole amount goes into the showroom's cash without distinction, two things happen:
- Your revenue looks bigger than it is: 30,000 of sales instead of 1,500 of commission.
- You spend money that isn't yours: you buy a new car with it, then the owner comes asking for their share.
For the same reason, a consigned car must never enter your stock value. A car worth 30,000 isn't your asset, and counting it inflates your showroom on paper and corrupts every stock report.
Calculating the Owner's Share
Owner's share = sale price − showroom commission
Example: a consigned car with a 27,000 minimum and 5% commission sells for 30,000:
- Showroom commission = 5% × 30,000 = 1,500
- Owner's share = 30,000 − 1,500 = 28,500
The owner's payment is recorded with its date and method, so you keep a clear record of what they received and when. That record alone settles half the disputes.
Brokerage: Commission from Whom?
In brokerage you never hold the car, so there is nothing to photograph, list or add to stock. But you still need to record the deal: the car's description and chassis number, the seller and buyer, the sale price, the commission and who pays it: the seller, the buyer, or both. On collection, only the commission is recorded as revenue, not the car's price.
How Mazoon ERP Handles Consignment and Brokerage
In Mazoon ERP's car dealership management software:
- A consigned car is recorded with the ownership type "consignment", and the system won't attach a consignment agreement to a car that has a purchase deal, because a car you bought is yours, not someone else's.
- The agreement sets the owner, term, commission (percentage or amount) and minimum price.
- On sale, the system calculates the owner's share and lets you record their payment. The car never enters your stock value at any stage.
- If the term ends without a sale, the car is returned to its owner and the agreement closes.
- Brokerage deals are recorded separately with their commission and who pays it, and the revenue entry posts on collection.
Step-by-step with screenshots in the guide: Consignment and brokerage. And why this stream lifts showroom profit: Car Showroom Profits: Where the Profit Comes From and Where It Leaks.
Frequently Asked Questions
What is consignment selling at a car showroom?
The owner leaves their car at the showroom, which sells it on their behalf for a commission without buying it. The car stays the owner's until it sells; then the showroom takes its commission and pays the owner the rest.
How much commission does a showroom charge to sell a car?
There is no standard rate; it varies by country, the car's value and the agreement. It is set either as a percentage of the sale price or as a fixed amount. What matters is writing it into the agreement before taking the car.
What is the difference between consignment and brokerage?
With consignment the car stands in your showroom and you sell it for the owner. With brokerage the car stays with its owner and your role is limited to bringing seller and buyer together for a commission.
Does a consigned car count as showroom stock?
No. It isn't your asset, and counting it in stock value inflates your numbers and corrupts your reports. Your revenue from it is the commission only.
What happens if a consigned car doesn't sell?
When the term ends, the agreement is renewed, the minimum is lowered with the owner's consent, or the car is returned and the agreement closed. That is why the agreement needs a clear term from the start.
Who pays the brokerage commission?
Whatever you agree: the seller, the buyer, or both. Decide it before the deal completes and record it with the deal.
Conclusion
Consignment is one of the smartest profit streams for a showroom: return with almost no capital, and a full showroom without buying. But it works on two conditions: a written agreement before handover, and the owner's money kept apart from yours from the moment you collect it.
Try the car dealership management software free for 7 days, record your first consigned car and let the system calculate the owner's share. For the full picture: How to choose car dealership management software.