'On the road' fee shrouded in vagueness

In a move likely to send shock waves through the country’s motor dealership networks‚ BMW Financial Services - the car maker’s vehicle finance subsidiary - has been ordered by the National Credit Regulator to refund its customers the substantial on-the-road fee it added to their credit agreements.

This fee‚ also referred to as a “service and delivery fee” or “dealership fee” is routinely added to finance agreements by the overwhelming majority of South African motor dealerships and their vehicle finance partners‚ usually without a breakdown of what it covers.

In BMW’s case‚ the fee is between R3,000 and R6,000.

Asked how many BMW buyers were eligible to be refunded that fee‚ NCR’s investigations and enforcement manager Jacqueline Peters said the regulator wouldn’t know that until BMW Financial Services‚ a registered credit provider‚ submitted an audit report‚ as they are compelled to do by the terms of the NCR compliance order.

An on-the-road fee is not among the list of extra charges which the National Credit Act allows credit providers to add to a credit agreement‚ which include an initiation fee; extended warranty; delivery‚ initial fuelling and licence or registration fees. Those fees may not exceed the actual amount payable by the credit provider.

Motor dealerships charge their customers a fee for getting a vehicle licensed and registered at a licensing bureau‚ over and above the fee levied by the State‚ but this is allowed by the Act.

Pressed to reveal what the on-the-road fee covers‚ dealerships generally list the likes of a pre-delivery check‚ valet‚ fuel and even gifts for the new owner‚ such as flowers‚ champagne and a giant bow around the new set of wheels. The fee is added to the credit agreement and adds significantly to the interest payable over the finance term.

Many dealerships renamed their “delivery fee” as an on-the-road fee when incensed buyers pointed out that their cars were not delivered to them: deals are signed in dealerships and the cars driven off showroom floors.

The NCR is conducting an industry-wide investigation to root out illegal charges and fees and to see those consumers who have been charged them refunded or credited‚ the body told the media on Thursday.

When Clint Tomlinson bought a second-hand Volvo S40 from a Durban dealership recently‚ a R4,990 fee for “service‚ delivery and fuelling” was added to his credit agreement. This despite the fact that the car had less than R100 worth of fuel in it when he collected it and it had been serviced a full six months before the sale.

Asked for a breakdown‚ the dealer principle said the amount covered “preparation of vehicle‚ COR‚ valet and related documentation”.

But no roadworthy certificate was ever produced‚ prompting Tomlinson to say he’d essentially paid R5,000 for a valet.

Approached recently on the issue of the contentious on-the-road fee‚ neither motor industry ombudsman Johan van Vreden nor Retail Motor Industry Organisation company secretary Gary McCraw would be drawn on the suggestion that the cost of preparing a vehicle for sale - such as having it cleaned and checked - ought to be built into its advertised selling price‚ rather than added to the deal as an extra cost.

At the time of writing‚ BMW had not responded to a request to comment on the compliance order and reveal whether or not the company intends to lodge an appeal with the National Consumer Tribunal.

CONTACT WENDY:

Email: consumer@knowler.co.zaTwitter: @wendyknowler