Auto Consignment Scams

Consignment sales for basic personal products seem pretty straightforward: you drop off your item at a consignment store and you receive a check if your item sells, with a fee taken out of your profits in order to compensate the consignment store for housing and selling your item.

Auto consignment sales work similarly on a basic level; only the product and its sale are more complicated and have much higher stakes price-wise. Consigning a vehicle requires a lot of detail work on the part of the dealer, but it’s also wise for vehicle owners to take certain precautions throughout the process to ensure that that they are not taken advantage of. Consignment scams are common because dealers aim to maximize their profit, which sometimes leads to vehicle owners being defrauded.

If you suspect that a consignment dealer defrauded you or acted unlawfully during the consignment process, then you may be entitled to take legal action and recover any damages you suffered. Contact us at the Law Offices of Robert Mobasseri at (213) 282-2200 for a free legal consultation with one our experienced auto law attorneys. Our firm has extensive knowledge of and experience with cases of auto fraud, dealer fraud, repair fraud, and consumer protection. We aim to protect all California consumers from unlawful abuses. You can also submit an online case evaluation form through our site, to be reviewed by one of our attorneys who will contact you further regarding your legal options.

How does auto consignment work?

For vehicles, consignment is a contractual agreement between an owner and a dealership stipulating that the dealership will take possession of your vehicle to sell it on your behalf, and in exchange they will receive a marginal cut of your profits. There are a few benefits to allowing a consignment dealership to handle the sale of your vehicle:

  • It saves you the hassle of dealing with a private sale, making you responsible for advertising your vehicle, setting its price, negotiating, and handling the paperwork of the sale
  • It becomes the dealership’s job to market and display your vehicles in their lot, on their website, sometimes at vehicle shows, and through other agreed upon methods
  • It is the dealer’s responsibility to handle all sale and DMV paperwork; you are often charged for the costs incurred by the dealership during this process, but in turn it saves you time and personal hassle
  • In California, all consignment agreements must be in writing (according to Vehicle Code 11729 & 11730), but pricing policies vary from dealership to dealership. Most consignment dealers would like an owner to agree to be paid a flat fee, with the remaining profit going to the dealer. Other consignment dealers take a percentage price, usually between 10% and 20% of the vehicle’s sale. Owners of lower end vehicles being consigned might benefit from allowing a percentage fee to be taken out of the overall sale, while higher end vehicles or larger items like RVs may benefit from a flat rate agreement, but each situation and dealer is unique.

    Common Auto Consignment Scams

    There are several opportunities during the consignment process where dealers have an opportunity to maximize their profits at the cost of the vehicle owner. Scamming and defrauding a consumer is nothing new and is unfortunately all too common in the auto sales industry. Some common auto consignments scams include:

  • deflating a vehicle’s value during its initial appraisal
  • playing a potential buyer’s offer against the owner’s asking price so that the dealer can pocket the difference
  • lying to the owner about what they charged the buyer for the vehicle and profiting off of the difference
  • A big reason consignment dealers would like an owner to agree to a flat rate payout, while the dealer pockets the rest, is because the dealer stands to gain the most. A car dealer has experience negotiating a vehicle’s sale and they realize that they have the most to gain from an agreement where your take as the owner is fixed, and the remaining profit goes to them. This is a good incentive for many consignment dealers to commit a common act of fraud by deflating a car’s value during its appraisal.

    When you bring in your vehicle to a consignment dealer and they agree to sell it on your behalf, your vehicle is then appraised so that the dealer can determine what its market value is. It is at this juncture that dealers often try and take advantage of a vehicle’s owner by appraising it a lower value than the vehicle is actually worth. If you’ve agreed to be paid a flat-rate payout, then this type of scam is especially common. By appraising the vehicle at a lower value, you receive a smaller flat rate payout, then the dealer may turn around and sell your vehicle for a higher price and pocket the hefty profit.

    Another common method that consignment dealers use to defraud owners is often used when the dealer has received an offer from an interested buyer. In this instance, the dealer may contact you and say that this buyer wants to purchase your vehicle, but will only pay a certain amount (usually below your asking price) and is looking at other vehicles. The owner then feels the need to act fast and secure the sale, so they may agree. Meanwhile, the dealer may have been telling the buyer your true asking price or higher, and the buyer commits, assuming everything is on the up and up between the dealer and the vehicle owner. The profit difference between what the buyer pays and what the owner receives goes to the dealer, sometimes with neither party any wiser. A variation of this scam occurs when the dealer makes a sale and lies to the owner about what they charged, keeping any profit difference for themselves.

    Many of these scams can be avoided if the owner of a vehicle is sure to get every business transaction documented. Dealers are far less likely to falsify appraisals and sale amounts if they are being held accountable on paper. It’s important for buyers to stay on top of dealers to ensure they’re not taken advantage of, and a good way to do this is to persistently document your business interactions with your consignment dealer.

    Even if you were unable to document every step of your consignment process, you are not without rights, especially if your consignment dealer operated unlawfully. You may have questions about your particular case or what legal options are available to you: contact us at the Law Offices of Robert Mobasseri at (213) 282-2000 for a free consultation. You can also submit a free online case evaluation form to be reviewed by a member of our firm who will contact you further. Our lemon law attorneys have a strong history representing California consumers in cases of auto fraud, dealer fraud, repair fraud, and consumer protection.

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    Lemon Law Auto Fraud serves the following California counties: Inyo, Imperial, Kern, Los Angeles, Mono, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, Tulare, and Ventura.

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