Texas Car Consignment Rules & Dealer Requirements | 2025 Guide

Car consignment in Texas is legal, but dealers must follow specific state rules designed to protect sellers and buyers. These Texas car consignment rules, dealer requirements, and best practices (updated for 2025) cover written agreements, title handling, lien payoff, insurance, and fee disclosure.

Dealer License Requirements

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

• Private individuals cannot offer consignment services without a dealer’s license.

• The Texas Department of Motor Vehicles (TxDMV) regulates licensing.

Source: TxDMV Dealer Licensing

Source: Texas Department of Motor Vehicles – Publications - Dealer Manual (PDF)

Written Agreements

A written consignment agreement is required in Texas.

The agreement should include:

• Seller’s name, address, phone, email, and vehicle details (VIN, mileage, title status)

• Dealer’s responsibilities (marketing, storage, test drives, payoff if applicable)

• Vehicle eligibility criteria and requirements (condition, safety, state inspections, and other factors)

• Commission or fee structure and other related dealer services (reconditioning, repairs)

• Timing for how quickly seller receives net sale proceed funding once the vehicle is sold

• Terms for cancellation

• Seller’s insurance requirements while on consignment

Best Practice: Seller receives a signed copy and dealer keeps the original based on state records retention requirements.

Clear written agreements are the foundation of Texas consignment dealer requirements and help both parties avoid disputes.

Title, Odometer & Power of Attorney Handling

• Vehicle titles remain in the seller’s name until the vehicle is sold.

• Federal and Texas law require an odometer disclosure at the time of sale. Vehicles more than 20 model years old are classified as “Exempt.”

• A limited Power of Attorney (Form VTR-271-A) may be used to allow the dealer to transfer title once the vehicle is sold.

Best Practice: The dealer should retain and securely store the unsigned original title from the seller. If a lien is present, obtain and keep a copy of the title or payoff statement from the seller’s lender in the file.

Source: Texas DMV – Title Transfers & Odometer Disclosure - Selling a Car

Escrow / Seller Funding Timeline Rules

• Texas does not mandate escrow accounts for consignment.

• Many reputable dealers voluntarily use an escrow account to hold seller funds if the dealer accepts vehicles with "negative equity." 

• Texas law does not set a specific deadline for when a dealer must pay a seller after a consigned vehicle is sold. Instead, the timing is controlled by the written consignment agreement. While other statutes address trade-ins and taxes, there is no general regulation covering consignment payout deadlines.

Best Practice: To protect both parties, the dealer agreement should clearly state the payment timeline. Many reputable dealers remit net sale proceeds to sellers within 24–48 business hours after the dealer has been funded by the buyer or the buyer’s lender.

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 Texas car consignment dealer requirements, protecting both the seller and the dealer.

Lien Payoff Process

Vehicles with open loans can be consigned in Texas, but the lienholder must be paid off by the dealer at time of sale.  Dealers handle this process directly by sending funds and title release instructions to the lienholder.

Best Practice: At the start of the consignment, the seller should provide:

• Lender’s contact information
• A current payoff statement
• Written authorization for the dealer to process payoff

It’s also important to check for negative equity — when the loan payoff is higher than the expected net sale proceeds (estimate sale price minus the dealer’s commission, fees, and charges). If negative equity exists, the dealer should collect the shortfall from the seller upfront and hold it in trust. This ensures the lien can be fully satisfied and the title can be released without delays once the vehicle is sold.

Proper lien payoff handling is a critical part of Texas car consignment dealer requirements and ensures a smooth title transfer for both seller and buyer.

Fee Disclosure Rules

• Texas law requires all fees and commissions to be clearly disclosed in writing.

• This includes flat fees, percentages, reconditioning costs, and any storage or marketing fees.

Cancellation & Cooling-Off Notes

• Sellers may terminate the consignment agreement at any time, unless a specific contract clause states otherwise.

• Any cancellation terms (e.g., required notice, retrieval fees) must be spelled out in the written agreement.

FAQs

Here are common questions sellers and dealers ask about consignment in Texas.

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

How quickly will I get paid when I consign in Texas?
Texas law does not set a deadline — payment terms are defined in the written agreement. Best practice is for dealers to remit funds within 24–48 business hours after they are funded by the buyer or the buyer’s lender.

Can a car with a loan still be consigned?
Yes. As long as the dealer handles the lien payoff at closing. If the payoff is higher than the net sale proceeds (sale price minus dealer commission and fees), the seller must cover the difference upfront so the lien can be fully satisfied.

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.