We want to warn you about selling your car on a "sale or return" or "commission" basis with dealers.
In theory it`s a great idea. You leave your car with a dealer to sell, once sold they return you the money and because they didn`t have to fund the car during the sale process you get a bit more money than you would have done if they`d bought it outright from you. What could possibly be wrong with that ?
If, once your car sells the dealer shuts up shop before you get paid then you are, what is know in some circles as, completely knackered. If you owed money on the vehicle you could even have to keep making the payments for the car you no longer own. It may be the dealer had the best of intentions to pay you and they were lovely people but simply went out of business because they weren`t making enough money and their overheads were too high.
There is no magic arena in which to sell cars. You can't get more money for a customer's car you've borrowed to try and sell than you can for one you own outright. In fact we might even go so far as suggesting owning your own stock makes you a bit more motivated to try and sell it.
The cost of stocking cars is at an all time low. At the time of writing Bank of England base rate stood at just 0.5%. But that isn`t the real story. Because good stock is relatively hard to find at the moment established dealers who have built up a fund of money with which to buy cars have got cash coming out of every orifice. In reality they don`t assign a value to the money which pays for their stock the money is free. There is no stocking loan charge.
Dealers selling borrowed cars still need somewhere to work from. They still need to employ staff. They still need to advertise. They still need to cover all the boring stuff like accountants & insurance. They also - providing they`re here for the long term - still need to make provision in case something goes wrong with a car once sold. On top of all that they hopefully want to make a bit of profit.
The Carrot
If you don`t actually have to write out a cheque then you can be extremely optimistic with expected returns. A car which realistically might achieve £42 - 43,000 instantly becomes a certain £45,000, "possibly even more so fine an example is yours Sir." Working backwards you will be returned what some dealers sell their cars for once it sells.
The Stick
Of course if it doesn`t sell (and why should it - you wouldn`t buy it yourself because it`s too expensive), then a re-appraisal is necessary. There`s always an excuse, the market changed, they had a man in mind who bought elsewhere or the dealer is simply stunned that it failed to sell. But fail it did. So down comes the price and down with it your portion of the proceeds from any sale possibly to a lower figure than you were offered as an outright purchase all those weeks or months ago.
A lovely twist
There is a small snag whereby some car owners simply say OK I`ll take my car away and try elsewhere. In this scenario our hapless dealer hasn`t actually made any cash, but fear not. There are a couple of options. Suddenly out of the blue come a few bills for work carried out on the car whilst it was with the dealer. If you want the car back then you`ll have to settle up. The other option is to charge a small (ish) fee upfront, "just to cover our petty disbursements and to show commitment on your part Sir."
It gets worse
Not only might you have to stump up an upfront fee to put the car in the showroom you will also have to pay to get it up to scratch and ready for would be punters to paw over. There`s no point in trying to sell a car with scratches, dents, marks or mechanical issues - would you buy such a car when there are better examples on the market? In most cases the people offering to sell your car for you even do the work (at cost) for you. How convenient. Failing that they know a bloke who can do the work for you (at cost). Don`t forget of course that the figure you`re trying to achieve after all this money has been spent is the rather optimistic figure suggested by the nice man in a suit to hook you in. They haven`t had to lay out a penny, so what do they care if your car ends up selling for less after a few weeks or months. They still earn their commission. Ironically once you`ve taken all the costs off you might have been better off just taking an outright trade bid in the first place!
Drumming up business
Here`s a great way to snare new cars into the showroom: You advertise a car for sale. Our dealer calls to say they`ve got a man for your exact car. No quibble on the price, just pop it over on Saturday, they'll arrange for the chap to be there, he'll give it the once over, give them a depo and the job`s a good `un. When you turn up to the dealer`s on Saturday the potential buyer for your car has been called away on urgent business / a medical emergency / filming for the next platinum single has overshot. Either way leave the car with them, they`ll get it over to show to him and call Monday, it helps to gush a bit at this point about how amazing the car looks - wish all owners were as careful with their cars - can`t believe you didn`t mention the car had overmats - you know the patter. Monday comes around and would you believe it the bloke has only gone and bought a brand new car / died / been abducted by aliens / rushed away to start filming a next Hollywood blockbuster. Either way he won`t be buying your motor, but fear not cars as lovely as this don`t grow on trees so your friendly dealer has no doubt he`ll be able to shift it in a Jiffy. 2 months later it still hasn`t sold and you`re in a spot of bother.....
And even if it does sell......
From time to time cars left on sale or return do actually sell but even then there`s catch. The bloke buying it needs to part exchange a particularly undesirable old crate which he thinks is worth a fortune / your car miraculously sprung a huge oil leak just as the bloke was going to buy it / the bloke buying it didn`t sell his penthouse in Monaco for quite as much as he anticipated so to facilitate the sale you`ll have to reduce your promised return figure by a couple of grand. It never rains......
A few final things to consider
If the dealer really is so confident your car will sell then why won`t they buy it outright?
If the dealer is selling so many cars at the moment then why is there no money in the pot to buy cars with?
Would you be happy leaving the dealer a briefcase full of cash to the value of your car? Because that`s exactly what you are doing
Where will the money come from if the dealer suddenly has to buy back a previously sold car with a problem or needs to pay some bills? The answer could be from the proceeds of your car's sale. Your finance might get paid off following completion or the dealer may just see if he can turn the money round quickly for a bit extra first !
If you sold the car outright today could the money be used to generate revenue or reduce interest payments that would otherwise need to be paid whilst waiting for a commission sale?
The situations where sale or return does work
When a car is one that`s really hard to determine a value because they come on the market so infrequently
When a car is extremely expensive and the cost of stocking it significant.
When we do get involved in commission / sale or return deals there are no upfront fees. No bills unless agreed in advance. You are free to take your car away at any time up to the point a deposit is taken and we will discuss with you in advance the actual figure to be returned. If that amount changes it will never do so without your agreement and prior consent, (people do actually turn up with the odd horror to part exchange sometimes!). The occasional sale or return deal we do is in addition to our majority of outright purchases not the basis of our business.
If you want to sell your car on a no risk, outright basis today then click here
