MORE STRAIGHTFORWARDNESS IN NEW CAR PRICING
What appears to be more good news comes for consumers comes in a recent ruling by the Australian Competition & Consumer Commission (ACCC) that dealers must show the total driveaway price of all new cars. The new legislation should make the whole business of negotiating the price less difficult.
There will be no more ‘plus on-road costs’, which has traditionally included stamp duty, registration and third party insurance, and that old chestnut ‘dealer delivery’. The ‘clarity in pricing’ amendments to the Trade Practices Act require businesses to ‘prominently display’ the total price of the item offered for sale.
But industry analysts can see a downside for consumers. According to the chief executive of the Federal Chamber of Automotive Industries (FCAI), Andrew McKellar, “One of the consequences might be, not only to make the price transparent, but invisible. Does the price mean you cannot negotiate below that? They have left us with some quite difficult loose ends. There has now got to be a bit of fancy footwork to resolve the issues, as best we can, in the final run-in or as quickly as possible after that.”
While consumers will mostly welcome this dramatic increase in transparency, some dealers will feel differently. Instead of being able to advertise a car at, say, $19,990 plus on-road costs, the figure may be closer to $24,000, which will deter consumers who were not aware of how much the government takes in stamp duty and that dealer delivery can sometimes be more than $1500.
Nevertheless in an ever increasingly competitive market, dealers will still have to deal, which means this is a good outcome for buyers. We can hardly expect the new legislation, effective from Monday May 25, to lead to a real increase in the price of new cars. Rather, it may force dealers charging exorbitant delivery charges to sharpen their pencils by eating into the ‘gross’ of a car, which is generally close to 10 per cent of the recommended retail price. Of course, they do this already, but regaining this loss through higher delivery costs may no longer be an option.
Another question is: when is the sale complete? Expect a renewed push to sell customers aftermarket items such as ‘rust protection’ and ‘paint protection’ and here is a great example of buyer beware. Once the car has been delivered it then becomes a used vehicle. What’s to stop dealers trying to make more money from the customer at this stage through the offer of extras like those mentioned above, or perhaps by trying to sell a package which includes extended warranty and covers all servicing costs?
A final point consumers should remember: dealers are in business to make money and cannot be expected to operate like charitable organisations. Greater transparency will help the less-informed consumer but will make no difference for the experienced shopper.
