Consignment selling of vehicles

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Motor industry

Selling vehicles by consignment and maintaining the trust account

Consignment selling is the process by which a licensed motor vehicle dealer agrees to sell a vehicle on behalf of a member of the public. The dealer then pays the former owner the sale proceeds less an agreed commission.

Sales by consignment are regulated under the Motor Vehicle Dealers Act, which requires dealers to use standard terms and conditions for their consignment sales agreements - these are legal documents. The Act also requires dealers to establish consignment trust accounts and controls how those accounts are used.

Dealers should take particular notice of the requirements for payments into and out of the trust account.

Approval for consignment selling - change to dealers licence

A condition is generally imposed on all dealers licences to prevent consignment selling. In order to remove this condition from a licence, the Commissioner must be satisfied the licensee continues to have sufficient financial resources.

A dealer wishing to engage in consignment selling must apply to remove this condition using the form Request to Remove Consignment Condition from Motor Vehicle Dealer licence.

Trust accounts

Before taking any vehicle under a consignment agreement, the dealer must be permitted to do so in accordance with their licence and have opened a 'Consignment Trust Account' in which to deposit the funds. The dealer must ensure that the name of the trust account includes:

  • the full name of the dealer;
  • the dealer's licence number;
  • the trading name (if any); and
  • the words 'consignment trust account'.

When a dealer opens or closes a trust account, the Commissioner for Consumer Protection must be informed as soon as practicable in writing specifying:

  • the name and number of the trust account; and
  • the name and address of the financial institution with which the trust account is or was maintained.

Consignment trust account & auditor form

Payments into and out of consignment trust accounts

All funds from the sale of a consignment vehicle must be paid into the trust account.

If the vehicle is sold on consignment and the dealer accepts a trade-in vehicle as part payment (consideration), the dealer must deposit in the trust account an amount equal to the trade-in value of the vehicle.

If the trade-in value is greater than the amount owed to the consignor or owner of the vehicle, the dealer may deduct the money owed to the purchaser from the trade in-value deposited.

Payment of the money into the trust account must be made within one business day of receipt.

Payment to the person consigning the vehicle (the owner) must be made within two business days of receiving payment.

A dealer's commission must be authorised in writing and must be paid from the trust account. This is shown at Condition 3 of the consignment agreement.

Only monies relating to consignment transactions can be deposited or withdrawn from a trust account. Bank fees and charges for operating the trust account must be paid from a dealer's general account.

Auditing and reporting on trust accounts

A dealer must ensure that a record is kept relating to a trust account. The record must be in writing, maintained for not less than six years from the date on which the money was received and be made readily accessible.

Financial institutions must notify the Commissioner for Consumer Protection when any trust account is overdrawn.

A dealer must ensure that each trust account is audited by a registered company auditor annually (within 12 months of the date on which it is opened).

In accordance with the requirements of the Motor Vehicle Dealers (Sales) Regulations 1974, these audits will be due within three (3) months of the end of the audit period.

If there have been no transactions through the trust account in the 12-month period following the date on which the trust account was opened, a statutory declaration to this effect may be submitted.

The Commissioner for Consumer Protection may order a special audit of trust accounts at any time where deficiencies or mismanagement are suspected. The cost of this audit will be at the dealer's expense.

Consignment agreement (contracts)

When entering into a consignment agreement with a member of the public, all contracts must be in writing and must contain all the below terms and conditions as required by the Motor Vehicle Dealers (Sales) Regulations 1974. The Motor Trade Association of WA standard consignment contract conforms to these requirements.

The agreement should make it clear what the settlement or net return to the person consigning the vehicle (owner) will be.

Under the agreement, a dealer cannot charge the owner for pre-sale repairs unless they have the owner's prior written consent. The dealer must pay for warranty repairs, which cannot be charged back to the consignor (owner).

1. Formation

1.1 The signing of this Contract by the Owner and the Dealer or a person authorised by the Dealer means an agreement has been made between the Owner and the Dealer for the Vehicle to be sold on the terms and conditions stated in this Contract.

1.2 No agreement is made unless the Owner is provided with a copy of this Contract at the time it is signed by the Owner and Dealer or a person authorised by the Dealer.

1.3 The Owner grants the Dealer exclusive right to sell the Vehicle for the period stated on the Contract.

2. Sale price

2.1 The Dealer may sell the Vehicle for more than the amount agreed to as the Minimum Sale Price for the Vehicle. The Dealer will be entitled to retain any amount in excess of the Minimum Sale Price as Commission.

3. Settlement

3.1 If the Dealer sells the Vehicle, the Dealer will pay any Total Net Proceeds to the Owner within two business days of receiving payment.

3.2 If the payment for all or part of the Sale Price of the Vehicle has been made by cheque, the payment will not be considered to have been received by the Dealer until the cheque has been honoured.

3.3 The Dealer will not release the Vehicle to the Purchaser until the Purchase Price has been paid in full to the Dealer.

4. Ownership

4.1 The Owner will retain ownership and property in the Vehicle until such time as the Purchase Price has been paid in full to the Dealer.

5. Responsibility for repairs

5.1 Subject to Clause 8.1, the Owner will be responsible for the cost of repairing any defects or faults identified prior to the Sale of the Vehicle.

6. Vehicle declared unfit for sale

6.1 The Dealer will give Notice to the Owner if the Vehicle is declared unfit for Sale by any Government Authority.

6.2 The Owner will be responsible for any costs or actions necessary to have the Vehicle declared fit for sale or to remove the Vehicle from the Dealer’s premises.

7. Payment for repairs

7.1 The Dealer will not carry out any work on the Vehicle without the prior written consent of the Owner. The Owner may authorise the Dealer to deduct the cost of repairs from the Proceeds Payable after the Sale of the Vehicle.

8. Dealer’s responsibility

8.1 The Dealer will not be liable for any loss or damage which may occur to the Vehicle while on Consignment except for:
(a) any theft, loss or damage which may arise out of any negligent act or omission on the part of the Dealer or any person acting on behalf of the Dealer; or
(b) any breach of the Australian Consumer Law (replaced the Fair Trading Act 1987) or Trade Practices Act 1974, the liability and remedies for which cannot be excluded by agreement.

9. Warranty claims

9.1 The Dealer will be responsible to pay for warranty claims which arise about the quality or fitness of the Vehicle in accordance with the Dealer’s statutory responsibility under the Motor Vehicle Dealers Act 1973, Fair Trading Act 1987 or the Trade Practices Act 1974.

9.2 The Dealer can not claim from the Owner any costs arising for such repairs, either directly, or by way of deduction from the Total Net Proceeds retained in a Trust Account.

10. Ownership and encumberances

10.1 The Owner declares that the Owner has the right to sell the Vehicle. The Owner will provide the Dealer with a certificate from the Register of Encumbered Vehicles within two (2) business days after signing this Contract.

10.2 If a registered security interest is recorded pursuant to the Chattels Security Act 1987 on the Vehicle, the interest must be discharged prior to the Sale of the Vehicle.

10.3 The Owner will give the Dealer all licence and registration documents, owner’s manual and service records (if any) relating to the Vehicle within two (2) days after signing this Contract.

11. Ending the agreement

11.1 This Contract can be terminated by either the Dealer or the Owner by giving twenty-four (24) hours Written Notice to the other at any time prior to the sale of the Vehicle.

11.2 The Owner will remove the Vehicle from the Dealer’s premises within seven (7) days after termination of the Contract.

11.3 The Owner will pay any monies owed to the Dealer before removing the Vehicle.

11.4 If the Vehicle is not removed, or monies owed are not paid within seven (7) days, the Dealer may return the Vehicle to the Owner’s address and recover any expenses incurred during the Consignment.

12. Changing the agreement

12.1 Any variation of this Contract must be in writing and signed by both the Owner and Dealer or a person authorised by the Dealer.

13. Notice

13.1 Any Notice required by this Contract may be given by direct communication, telephone, electronically, fax or post to the addresses and numbers included in this Contract.

13.2 If sent by post, a Notice will be considered to have been received, unless the contrary is shown, at the time when the Notice would have been delivered in the ordinary course of the post.

Contact Us

Should you require any further information on these matters, please ring: 

Consumer Protection Advice Line 1300 304 054

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