Chaos rules in car price advertising

THE Australian automotive industry is in disarray this week after federal law requiring full vehicle pricing disclosure came into force.

Most car-makers have opted to drop all pricing information from their websites, leaving customers in the dark after an amendment to the Trade Practices Act made it compulsory to advertise only the full and final price, while banning the current practice of advertising a recommended retail price with a rider saying that on-road costs are extra.

The new system has thrown up a number of headaches for car companies and consumers, ranging from how car companies can account for the disparity in state fees and taxes – which include pensioner discounts in some states – to how car companies can set a single dealer delivery charge – a practice many believe is tantamount to price fixing.

In essence, the Australian Competition and Consumer Commission (ACCC), headed by chairman Graeme Samuel, wants all car companies to use only drive-away pricing, with no added costs or charges.

Some industry executives believe consumers in states that currently enjoy low state stamp duty, registration and third-party insurance fees will end up being the losers if car companies are forced to set a national driveaway price which has to be higher to account for the higher on-road costs in other states.

But without all-inclusive national driveaway pricing, car companies are faced with the prospect of dropping all national price references in advertising and websites for fear of being prosecuted.

“Our frustration is that, trying to put all these components (registration, third party insurance, dealer delivery etc) into a single price is technically and physically impossible because of the variations involved,” said Rob Dommerson, chief executive of Sime Darby, which imports Peugeot and SsangYong.

BMW spokesman Toni Andreevski said that in one fell swoop, the ACCC had turned the clock back on the car-buying process.

“This has put access to information back into the dark ages, where people had to walk to a dealership or make a phone call to talk to a salesman,” he said.

“It’s as if the internet didn’t exist any more.” Most car-makers now have a note on their websites recommending that buyers go to a dealer to get a final price.

“But can you do that 40 times?” Mr Andreevski said.

Market leader Toyota is continuing to publish recommended retail prices on its website, including dealer delivery charges in the price.

Toyota takes the view that what it charges for a car, including dealer delivery costs, is all it can control and is therefore the extent of its pricing responsibilities.

The company can reliably quote on the dealer delivery charges because Toyota made its own estimate and wrote that into the Toyota dealer agreement, according to divisional manager, marketing, Peter Webster.

Under the agreement, Toyota dealers can charge less than the estimate, but not more, allowing Toyota to be able to quote a national price.

In Toyota’s view taxes such as stamp duty and third-party insurance are on-costs imposed by governments, and are not part of the price Toyota charges for its products.

In the ‘Build and Price’ section of its website, Toyota points out that a vehicle purchase is subject to additional statutory charges – and a cost for metallic paint.

The website then directs you to a page which contains links to the various state and territory such as the Roads and Traffic Authority in NSW or VicRoads in Victoria for information about the statutory charges that will apply.

Suzuki has just completed a six-day special offer campaign that included offering drive-away prices across the country, which most manufacturers and importers do from time to time. These campaigns offer discounted prices and the car-makers tend to swallow any differences in fees and charges for the short period of the campaign.

However, managing director Tony Devers believes the adoption of national drive-away prices on an every-day basis would be bad for customers in several states, mainly the smaller ones.

“We’ll comply with the legislation,” Mr Devers said. “We can go drive-away.” But, he warned that to reach a national uniform price, it would have to be pitched at a level which covered the most expensive rate of stamp duty, the highest registration charges and the steepest dealer delivery charges from around the country.

“Given that stamp duty is higher in WA and dealer delivery charges in Sydney and Melbourne are higher because of overheads, a national drive-away price will have to cover these costs.

“It’ll mean perhaps it may not be the cheapest price because having one price that fits all means it will have to cover those higher costs in, say, Melbourne and Sydney.” That means customers in smaller states may end up paying prices high enough to cover big-city dealer delivery charges and WA stamp duty rates.

And it could mean a company trying to do the right thing by providing a national drive-away price may be disadvantaged as competitors may revert to state advertising and strike prices that reflect the lower cost structures in some states.

Mr Andreevski said a myriad of issues needed to be taken into account when calculating a national price.

“Pensioners in NSW do not even pay stamp duty. What are we supposed to do? Have a website for pensioners and another for working families?” Another tricky one is how to handle the dealer delivery charge. No car company can force or persuade its dealers to charge the same price, Mr Andreevskli said.

“You can’t standardise the dealer delivery charge. That’s illegal. That would be price fixing.

“The same ACCC that wants us to come up with a national drive-away price would prosecute us if we did that. That would be price fixing.” “There is no concern with the aim of the changes brought in by the ACCC. If you only list the RRP and not the final price, you don’t know what the true final cost will be.

“It is just that there are unintended consequences that are not, in all cases, going to be to the benefit of the consumer.”

Read more:

ACCC shafts car buyers

Alarm bells on new advertising rules