Niche Biz: Auto Consignment
Leslie Vander Baan turned selling her 1997 Jeep Cherokee into a million-dollar business and she isn’t even 30 yet.
Four years ago, Vander Baan, who’d been around cars her entire life, found selling her vehicle a headache. She had to find time to meet with potential buyers after working long days at an auto auction. She had to sneak related phone calls during busy work hours. But she did all that because she knew she’d get more in a private sale than a dealer trade-in.
There must be a better way to sell a used car, she thought. Maybe a consignment shop. She pictured a car lot where sellers could drop off their wheels and pay her to find a buyer.
Six months later, she opened Automotive Consignment on Independence Boulevard’s auto row with $500,000 in startup funds. She started with five cars that she bought herself so she would have some inventory. Now there are about 120 cars on the lot at any given time and last year the business posted $1.2 million in sales, she said.
Consignment in general is nothing new. But the goods for sale typically are clothing or furniture, not cars.
Photo by Automotive Consignment.
Carl on October 13th, 2006 11:10 am
Nobel attempt at innovation but falls short when it comes to results. This consignment dealership claims sales success at 60%-70% when in fact it comes closer to 30%. Average turn time on inventory is much more than 45 days, while their touted 1.2 million in sales per year really breaks down to about 20 car sales per month if you take into account an average selling price of $5,000 per car. Out of that 20, many of those vehicles are bought by Automotive Consignment to sell under their guaranteed financing program that charges most buyers the max. interest rate allowed by the state. The dealership tends to attract customer’s with credit histories that do not allow them to purchase the dealerships “consigned inventory”. 20 vehicles out of an inventory of 120 isn’t what most would classify as a successful and viable car buying and selling alternative. Stick with autotrader.com or cars.com.
Leslie on October 27th, 2006 6:21 am
1.2 million in sales does not refer to dollars of inventory rather total consignment service revenue. Consignment sales per year total 5-6 million. Automotive Consignment sells 50 plus vehicles per month and growing. Less than 10 % of their vehicle sales are sold through their guaranteed financing program. Automotive Consignment is excited to provide finance options for everyone! Consignment inventory comprises over 80 % of their inventory and they sell 60-70% of that every month! (80% of 120 equal 96 vehicles, 60% sales equal 50 + sales per month). Their service provides all of the advertising and visibility necessary to attract a buyer without the typical time, hassle, and inconvenience associated with selling on your own! They are the only dealership of their kind servicing the For Sale By Owner market. The For Sale By Owner market is equal to the size of the entire Independent Dealership sales used car market. Automotive Consignment’s service is a value add in an underserved market place!
Matt on November 2nd, 2006 2:49 am
I tend to agree with Carl. Besides your infommercial delivery, I’ve run a few financial models with your numbers and they look over-inflated. If I take your average revenue per vehicle and your average number of vehicles sold per month…even working backwards, I fail to validate your stated revenue. [(1.2mil/$470)/12)]=212 units per month. Even taking into account several variances (financing profit, sales success rate, etc.), it just doesn’t add up. I tend to flinch a bit when numbers are quoted in terms of 5-6 million. With an organization of your scale, 1 million is a huge discrepancy. You have created absolutely no geographic marketing synergies and cross-selling opportunities with a single location. I see this being a negative factor for success and inventory turn. The for sale by owner market would be better served with multiple locations across the US in various locales. You may be providing test drives and other ancillary services but those present their own challenges in terms of sales and operations. Insurance for these services has to be seriously prohibitive and at this point and time you probably have the owner assume liability for your company’s actions with their vehicle… whether it’s accident or theft related from 30+ days of “storage” on your dealership. A key expense for dealerships is their insurance because of high incidents of theft…the area that you are in is no exception (http://maps.cmpdweb.org/cmpdnet/map.aspx) At this point, the for sale by owner market is served by both Autotrader.com and Cars.com which you utilize if I am not mistaken. Using either of those eliminates you from the equation. At this point you would face serious competition if either of those businesses decided to open brick and mortar locations. I just see the cost of entry being too high for your type of venture without major financial backing for multiple locations and a serious retooling of your sales/marketing structure and most importantly your driving key economic denominator.
John on March 2nd, 2007 8:08 am
I am not sure what their turn rate on cars is, however I can tell you that when you go there to sell your car they give you mad pressure to put a ridiculously low price on your car, and then they take like 10% or so for a commission. I listed my car on Autotrader and got over $4000 more for my car in two weeks than what they were trying to have me sell my car at their store for. In the end, by going to the Autotrader I saved over $7000 by going it on my own.
Cynthia Southall on January 24th, 2008 7:34 pm
We have been selling Consignment Software for six years. With $100 oil and the US economy well into recession, the consignment business is picking up and that will apply to used cars. Might be a good time to reconsider business models and reassess opportunities.
fornetti on August 30th, 2008 7:24 pm
I do not believe this
Jeff Brown on April 26th, 2009 9:22 pm
Is that what Auto Consignment is really all about we have engineered a way to charge no consignment fees and let the owner make more than what they are selling for.
Tom on October 2nd, 2009 10:53 pm
Interesting stat for automotiveconsignment.com:
Alexa Trend/Rank:
The lower the rank the better. #7,876,929: Down 15,772 ranks over the last three months.
Compete Rank:
#4,467,710 with 13 U.S. visitors per month
The example below is a real innovator in the for sale by owner space:
• Website: http://www.mota.com
• Location: Venice, CA
• Funding: $4.5M
• CEO: Reza Bundy
MOTA powers the private party marketplace by delivering convenient, trustworthy and value driven transactions that result in a 15-20% savings for consumers.
MOTA’s process brings together all the best practices and makes it easy to follow, step by step, just like a cookbook.
MOTA enables consumers to price their vehicles according to real-time market trends, syndicate listings to multiple sites including free and premium marketplaces, validate the condition through inspection to support a seller’s asking price or satisfy a buyer’s need to know the vehicle’s condition, purchase vehicles with bank financing and protect their vehicle with extended warranties.
http://www.techcrunch50.com/2009/mota-motors/
Yachtcharter Griechenland on November 18th, 2009 4:30 am
Thanks for a sharing this articles. That’s very interesting.
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