Illinois Car Consignment Rules & Dealer Requirements | 2025 Guide

Car consignment in Illinois is legal, but dealers must follow clear rules and best practices. These Illinois car consignment rules, dealer requirements, and best practices (updated for 2025) cover written agreements, title & odometer handling, lien payoff, insurance, fee disclosure, and payment timing.

Dealer License Requirements

• Only licensed Illinois motor vehicle dealers may legally consign and sell vehicles.

• Private individuals may not legally operate consignment of vehicles unless licensed as a dealer.

• The Illinois Secretary of State regulates licensing and dealer operations under the Illinois Vehicle Code.

• Dealers must carry a $50,000 dealer bond (Illinois requirement for used vehicle dealers).

Source: Illinois Secretary of State – Dealer Licensing

Source: Illinois Compiled Statutes – Vehicle Code (625 ILCS 5/)

Source:  Dealer Licensing Requirements - Illinois Automobile Dealers Association (IADA)

Letter of Consignment – Required Information

Illinois law requires that a formal Letter of Consignment (written consignment agreement) be created for each vehicle. This document must contain specific details, including:

1. Vehicle description: year, make, model, color, and odometer reading.

2. Vehicle Identification Number (VIN).

3. Ownership document details: type, number, and issuing state.

4. Names and addresses of all lienholders.

5. Name and address of the person holding the ownership document.

6. Date the vehicle was delivered to the dealer.

7. Owner’s full legal name, address, phone number, and driver’s license number (or date of birth if no license).

8. Dealer’s name, address, and Illinois dealer license number.

9. A clear heading labeled “CONSIGNMENT” in all capital letters, at least 1/8 inch high.

10. The specific terms of the consignment as agreed between the parties.

11. Any additional information the parties choose to include.

12. Signatures of both the owner and the dealer (or an authorized agent), confirming accuracy of the information and verifying that the ownership documents match the physical inspection of the vehicle.

13. Noncompliance shall be deemed a violation of Section 5-401(b) of the Illinois Vehicle Code (Ill. Rev. Stat. 1983, ch. 951/2, par. 5-401(b)).

Source:  Admin. Code tit. 92, § 1020.50 - Consignment Sales by Dealers

Best Practice: Maintain copies of all consignment agreements for at least 3 years in compliance with Illinois recordkeeping rules.

Clear and accurate consignment letters are the foundation of Illinois dealer compliance and protect both the seller and the dealer.

Title, Odometer & Power of Attorney Handling

• Titles remain in the seller’s name until sold.

• Federal and Illinois law require odometer disclosure at time of sale. Illinois follows the new federal rule: vehicles model year 2011 and newer require odometer reporting until they reach 20 years old.

• The vehicle owner must sign a Power of Attorney authorizing the dealer to handle title matters on their behalf. This document should:

  • Allow the dealer to assign or transfer the ownership document once the vehicle is sold.

  • Authorize the dealer to request a duplicate title if the original has been lost, stolen, or damaged.

Source: Illinois Odometer Disclosure Requirements

Source: Illinois Secretary of State – Title & Registration Forms

Best Practice: Retain a notarized copy of the Power of Attorney to protect both parties and streamline title transfer with the Illinois Secretary of State.

Escrow / Consignor Payment Timing Rules

• Illinois does not mandate a separate escrow account for consignment sales.

• Illinois law does not set a statutory deadline for consignor payment — timing must be defined in the consignment agreement.

Best Practice:

• Dealers remit proceeds within 24–48 business hours after funds clear.

• Use a trust or escrow account when consigning vehicles with negative equity (loan payoff > net sale proceeds).

Insurance & Test Drives

• Dealers must carry garage liability insurance covering all vehicles on consignment.

• Dealers are responsible for test drive coverage and other liability or damage (caused on dealer lot, during transport to offsite locations) under their policy.

• Sellers should confirm their personal insurance may remain liable for all or a portion (force majeure) once the vehicle is left with the dealer.

Best Practice: Dealers should confirm with their insurance agent and/or underwriter that their policy specifically covers, Owned and Consigned vehicles for liability and certain damages. Dealers should require sellers to maintain full coverage (including comprehesive) while their vehicle is on consignment. This requirement should be included in the consignment agreement and discussed with the seller at time of signing. Obtain a copy of the seller's insurance card for verification and have the seller initial the insurance section of the agreement.

Clear insurance coverage and test drive responsibility are key best practices in Illinois car consignment dealer requirements, protecting both the seller and the dealer.

Lien Payoff Process

• Vehicles with open loans can be consigned, but the lienholder must be paid off at time of sale.

• Dealers must handle lien payoffs directly in compliance with the Illinois Vehicle Code, following the same process required for trade-ins or direct purchases.

Best Practice: At time of signing Consignment Letter, obtain:

• Lender contact information.

• Current payoff statement.

• Written authorization to process payoff.

• If negative equity exists, collect the shortfall from the seller upfront and hold in trust until the vehicle sells.

Fee Disclosure Rules

• All fees and commissions must be disclosed in writing.

• Disclose flat fees, percentage commissions, reconditioning, storage, or marketing fees.

Cancellation & Cooling-Off Notes

• Sellers may terminate the agreement unless otherwise stated in the contract.

• Any cancellation terms (notice period, retrieval fees, reimbursement for expenses) must be spelled out in writing.

FAQs

Can a private seller consign without going through a dealer?
No. Only licensed Illinois dealers may legally consign vehicles.

How long does an Illinois dealer have to pay the seller after sale?
There’s no statutory deadline. Payment terms must be defined in the Letter of Consignment (written agreement). Many dealers target 24–48 business hours after buyer funds clear.

Can a car with a loan still be consigned?
Yes, as long as the dealer processes lien payoff and ensures title transfer as required for all licensed dealer sales in Illinois.

Last reviewed: September 2025

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⚠️ Important Notice

This page is provided by Retail My Ride for general informational purposes only. It is not legal advice. Car consignment laws and dealer requirements may change at any time. Always confirm the latest rules with your state DMV, licensing authority, or qualified legal counsel before making decisions.