Boat Consignment: Understanding The Process And Benefits

Boat consignment is a hassle-free process that allows you to sell your boat without worrying about the logistics involved. When you consign a boat, you are still the owner but you hire a dealer or broker to help with the sale. The consignment dealer or broker will list and market the boat, show it to potential buyers, handle transactions, and transfer the title to the new owner once the sale is complete. They may also offer additional services such as boat transport, demonstrations, and financing options. The consignee will take a commission, typically ranging from 10% to 20% of the final sale value, as their fee for facilitating the sale.

How to retain legal ownership of the boat during the sale process

When selling a boat on consignment, you can retain its legal ownership during the sale process until the deal has been finalized. The dealer will list and sell the boat on your behalf in exchange for a service fee. This is similar to selling a house with a realtor. The dealer will show the boat to potential buyers, handle transactions, and transfer the title to the new owner once the sale is complete.

To retain legal ownership of the boat during the sale process, you must ensure that you have the valid title of ownership. This is a requirement for consigning your boat. You will also need to provide the dealer with warranty documentation, current outboard registration, proof of loan repayment, insurance documentation, trailer title (if applicable), and a certificate of seaworthiness.

It is important to note that consignment dealers are not liable for any issues with the boat. Therefore, it is crucial to conduct a thorough inspection of the boat before consigning it. Verify that there are no hidden liens on the boat and that all mortgages and liens are discharged. Check with the Secretary of State's office of the seller's residence and the ship's state of registration for any IRS liens.

Additionally, make sure to have a detailed agreement in writing with the dealer, outlining all the terms of the consignment, including the commission structure and any other fees involved. This will help prevent any misunderstandings or disputes during the sale process.

By following these steps, you can retain legal ownership of your boat while utilizing the services of a consignment dealer to facilitate the sale.

The role of a consignment dealer vs a boat broker

When it comes to selling a boat, there are several options available to you. You can sell it privately, or you can enlist the help of a professional, such as a consignment dealer or a boat broker.

Consignment Dealers

Consignment dealers will list and sell the boat on your behalf in exchange for a service fee. They are similar to boat brokers in that they act as representatives for the sale or purchase of a boat. However, there are some key differences between the two.

Dealers have boats on location, whereas brokers do not have a dealership or showroom. Dealers will sell their own boats and may also fix boats, while brokers are purely selling boats on commission. Dealers can also have their own franchise from a specific boat brand, and you will often see them at boat shows. There are brokerages that only sell used boats on consignment.

Another important distinction is that consignment dealers sell for an agreed-upon price, as opposed to a set percentage of commission. The dealer will assess the boat's components and give you an estimated selling price depending on the boat's condition, age, and model. Once you agree, the dealer will market the boat, handle offers, and schedule meetings with buyers.

Boat Brokers

Boat brokers represent either the buyer or the seller in the used boat market. They take on the responsibility of assessing fair value, advertising, managing sea trials, securing financing, and closing the deal. As a result, they earn a commission, which is usually 10%.

Brokers have a deep knowledge of the boating marketplace, so many buyers and sellers use them for used boat transactions. They can facilitate the sale of any brand or type of boat, whereas dealers are only knowledgeable about the brands they work with.

If you're selling through a broker, they will often list their inventory nationally, attracting a wide range of buyers. They can also help owners value their used boats, negotiate on the owner's behalf, and process transaction paperwork.

If you're buying through a broker, they can help you find similar boats on the market and suggest comparable models. They can also arrange convenient and safe ways to test-drive boats.

Both consignment dealers and boat brokers can help relieve the burdens of buying or selling a boat and ensure the process goes smoothly. The option you choose will depend on your specific needs and requirements. If you're looking for a particular boat model from a particular maker, a boat dealer may be the best option. If you're selling a used boat and want someone to handle the details, a boat broker might be the way to go.

How consignment pricing is calculated

Consignment pricing is calculated based on a set commission percentage that the consignee will take as a fee for selling the product. This percentage typically ranges from 10% to 60% of the final sale value, but can be higher or lower depending on the company and the type of boat. For example, if a boat sells for $100,000 and the commission percentage is 10%, the consignor will receive $90,000 and the consignee will retain $10,000.

The consignment fee is designed to cover the consignee's costs, including rent, utilities, employee salaries, and advertising, and to provide an incentive for them to sell the product. In the case of boat consignment, the consignee will also usually charge additional fees for the boat's appraisal and marketing.

There are several factors that influence the consignment fee, including the type of product, the location of the consignment store, and the demand for the product. For example, high-end or luxury items may attract a higher consignment fee due to their exclusivity, while less popular products may attract a lower fee. The location of the store may also play a role, with stores in prime locations charging higher fees to cover their higher overhead costs.

It is important to note that consignment fees are negotiable, and it is common for consignors and consignees to negotiate the fee before entering into an agreement. Consignors may be able to offer something in return for a lower fee, such as a longer consignment period or a minimum sales guarantee. It is essential for both parties to carefully review the consignment agreement to understand how fees and splits are applied to the sale proceeds.

Pros and cons of selling a boat on consignment

Selling a boat on consignment can be a great option for boat owners who want to avoid the hassle of selling their boat privately. Here are some pros and cons to consider when deciding whether to sell your boat on consignment:

Pros:

• Convenience and expertise: Consigning your boat takes a huge chunk of responsibility off your shoulders. The dealer will handle most of the sales process, including listing, marketing, and showing the boat to potential buyers. They will also have the expertise to help you determine a fair market price for your boat.
• Wider audience: Consignment dealers often have established customer bases and marketing channels, which can increase the chances of selling your boat quickly.
• No upfront costs: You don't have to pay anything upfront to sell your boat on consignment, which can be a great option if you're short on cash.
• Financing options: Dealers can arrange financing for potential buyers, making it easier for them to purchase your boat.
• Time and cost savings: Consigning your boat can save you time and money spent on marketing and dealing with potential buyers.
• Flexibility on condition: Dealers may be willing to work with you even if your boat is not in excellent condition, increasing your chances of selling.
• Neutral advice: Dealers can provide objective advice on who to sell to, how much to charge, and when to sell, helping you avoid problems and making the process smoother.

Cons:

• Lack of control: Once you hand over your boat to the consignment dealer, you lose control over the sales process, including negotiations and pricing.
• Limited timeline: Consignment dealers usually only keep your boat on their lot for a set amount of time, which can pressure you to sell quickly or retrieve your boat.
• Potential for damage: Your boat may be used for demo rides or stored in a high-traffic area, increasing the risk of damage or wear and tear.
• High fees: Some consignment dealers may charge a high commission and boat consignment fee, making the process more expensive than you anticipated.
• Lack of transparency: Lack of transparency between you and the dealer can create issues that may ultimately hurt your boat's sale value.

Tips to sell your boat on consignment

• Be completely transparent with the consignment dealer regarding your boat.
• Give the dealer your "reserve price".
• A dealer can use a Purchase Option or Net Price, where the seller will be given a predetermined sale price, and everything received above that will be the dealer's commission. If you are not satisfied with this option, discuss it with the dealer and make arrangements beforehand.
• Avoid boat consignment scams.
• Read the document carefully and watch out for any hidden charges or transport costs for boats without a trailer.
• Discuss marketing, checkout, and inspection fees in advance so both parties are on the same page.
• Make sure the Purchase Option is in writing, explaining all the terms of the agreement and signed by both parties.
• Get any other necessary paperwork and Power of Attorneys signed at the time the boat is consigned.
• Be sure the agreement includes a requirement that the owner maintains the boat insurance policy.
• Check the mechanical condition of the boat with at least a compression check and a fluids check, looking for water in the engine or drive units.
• Detail the boat before putting it on the market. Clean boats sell quicker and for more money than dirty ones.
• Verify the lien holder and pay-off amount so that you don’t have any surprises at delivery, such as the owner owing more than they thought.
• Before determining whether to offer a warranty, check the laws of your state to determine whether you are obligated to warrant the vessel’s components for a minimum amount of time or use.

Frequently asked questions