Consignment and Brokerage Car Sales: How Commission Deals Work and How to Track Them

Every used car dealer does some deals where the car never belongs to them. An owner wants ₹4,80,000 for their Creta, does not want the hassle of selling it, and leaves it on your lot. You find the buyer, handle the paperwork, and keep whatever you sell it for above what the owner wanted - or a fixed commission. No purchase, no capital tied up, no GST margin on a car you did not buy. It is the closest thing the business has to free money, which is why it goes wrong so often: nobody records it properly, because there was nothing to record.

Key takeaways

• In a brokerage or consignment deal you sell on the owner’s behalf; your income is the commission, not the selling price, and the car is never your stock.
• The two ways to set the commission - a fixed fee, or everything above the owner’s expected amount - carry different risks; agree one in writing before the car arrives.
• Your costs on a consignment car (cleaning, advertising, parking, test-drive fuel) come out of the commission, so track them or the “free” deal quietly costs you.
• The owner signs the transfer forms, not you: the sale goes from the owner to the buyer with you as the intermediary.
• Record the deal as brokerage, not as a purchase and sale, or your stock value, GST and profit reports will all be wrong.

Three deal types, one lot

The GST point matters. The used car margin scheme applies to a dealer who buys and resells a car. On a consignment deal you are not buying anything - you are providing a service to the owner and earning a commission - so the margin scheme is not what applies to your income. Whether and how GST applies to your commission depends on your registration and turnover; that is a question for your chartered accountant, not a blog post. What this post covers is how to structure and track the deal so the CA has clean numbers.

Two ways to set the commission

• Fixed commission. The owner gets their expected amount and pays you an agreed fee - say ₹15,000 - regardless of the final price. Simple, transparent, and the owner has no reason to feel you profited from their car. Your upside is capped.
• Everything above the expected amount. The owner wants ₹4,80,000 net; you sell for ₹5,05,000 and keep ₹25,000. Your upside is open, but the owner may feel short-changed if they hear the real selling price, and you carry the risk of a slow sale for no reward.

Either is fine. What is not fine is leaving it unspoken. Write the owner’s expected amount, the commission basis, who pays which expenses, and how long the car stays on the lot on a one-page consignment note, signed by both of you, before the keys are handed over.

Where consignment deals lose money

• Uncounted expenses. A deep clean, a photo shoot, two months of parking and three test drives’ worth of fuel are real costs. On a ₹15,000 commission they can take a third of it.
• The owner sells it elsewhere. After you have paid for advertising and shown it to eight buyers, the owner’s cousin buys it. The consignment note should say what you are owed if that happens.
• Damage on your lot. A scratch in your parking is your problem unless the note says otherwise; check the owner’s insurance is live while the car is with you.
• Buyer default. If a buyer pays a token and disappears, you have spent time and the owner has lost a month. Record tokens and balances due so nothing is “remembered”.
• Paperwork in the wrong name. If you take the car into your own name to sell it, you have just converted a brokerage deal into a purchase - with GST on the margin, RTO fees and a second transfer. Keep the transfer owner-to-buyer.

The paperwork on a consignment sale

• A consignment note between you and the owner: expected amount, commission basis, expense responsibility, time limit, what happens if the owner withdraws the car.
• Copies of the RC, insurance and PUC while the car is with you, so you can answer a buyer’s questions and check nothing has lapsed.
• At sale, the transfer forms signed by the owner as seller - the RTO transfer runs from owner to buyer; you are not a party to it.
• A delivery note and receipt showing the token, the balance and the date the buyer took the car.
• Your commission invoice to the owner (or a receipt for the amount you retained), which is what your CA needs for the GST treatment of the commission.

Tracking it: why “no purchase” does not mean “no record”

The usual failure is that consignment cars are not in the stock sheet because nobody bought them - so they are not in any sheet at all. Then the parking bill is a general expense, the commission is a cash entry with no car attached, and the owner’s expected amount lives in someone’s memory. Three months later nobody can say whether brokerage deals are worth doing.

The fix is to record a consignment car as a car - just one with an owner’s expected amount instead of a purchase price. In VehicleERP a brokerage deal sits in the same inventory as your own stock with the right cost basis, its expenses are logged against it, the sale records the buyer, the token and the balance, and the commission income posts to the ledger as vehicle commission income rather than a vehicle sale. Your stock value stays honest, your GST records stay separate, and your reports show whether consignment is actually paying.

Frequently asked questions