Car fees: it's a scam

09 October 2017 - 19:56
Vehicles line up to catch the customer’s eye at a car dealership.
Vehicles line up to catch the customer’s eye at a car dealership.
Image: REUTERS

For over a decade I've been telling consumers that the fee car dealerships call "service and delivery", "on-the-road", or just a "dealership fee" is mostly an unjustified extra which ought to be built into the selling price.

I've advised people to refuse to pay for anything but a tank of fuel, number plates, and licence and registration fees - including a justifiable fee to cover the dealership's staff sparing the buyer a long licensing queue.

For years dealerships have got away with what an industry insider once conceded was "overzealous padding" in the form of the on-the-road fee, justifying it as the cost of "preparing" vehicles for sale.

But I dare say no dealership owner would take kindly to responding to an advert for a TV, only to have the price bloated with an admin fee to cover the cost of the salesman's commission, a pre-sale check and storage.

They'd argue that the advertised price was misleading and they'd be right.

Finally, last week, the National Credit Regulator said an on-the-road fee is not among the list of extra charges that the National Credit Act allows credit providers to add to a credit agreement. In other words, it's illegal.

The Regulator served BMW Financial Services with a compliance order, compelling the carmaker to refund or credit customers who had the fee - between R3000 and R6000 - added to their credit agreements.

BMW Financial Services said it "disagrees with and disputes" the contents of the compliance notice and intends to "object to it".

"The on-the-road fee is agreed to between the dealer and the consumer," said Edward Makwana of the BMW Group's communications division.

And that's the line used in defence of the on-the-road fee by dealerships, by the Motor Industry Ombudsman Johan van Vreden and by Retail Motor Industry Organisation company secretary Gary McCraw, who said: "It was disclosed on the contract which the customer signed."

Having investigated dozens of on-the-road fee complaints, I am confident that in most cases the fee is simply added to the credit agreement without disclosing what it covers. If buyers question it, they are often told it's a standard or non-negotiable fee.

It is not known if, when. or how refunds will be made, but I do know that the regulator's announcement - that it is conducting an industry-wide investigation to root out illegal charges and get on-the-road fees refunded or credited - is huge.

It will have rattled the industry and made consumers aware that the on-the-road fee is not only not "non-negotiable", but illegal.

The act allows for the following fees only to be added to a credit agreement: an initiation fee, extended warranty, delivery, initial fuelling and licence or registration fees. And those fees may not exceed the actual amount payable by the credit provider.

Over the years, I've asked many motor dealerships to break down how they arrived at R3000 or even R7000 as an on-the-road fee. Most, if they deign to respond, list the likes of a pre-delivery check, valet, fuelling, and even gifts for the new owner such as flowers, champagne and a giant bow around the new set of wheels.

In a particularly memorable case I took up in 2010, a Honda dealership had added to a credit agreement a "service and delivery fee" of R4000 plus another R1250 for licensing, registration and number plates.

Asked to break down that R4000, the dealership listed pre-delivery inspection (R1200), preparation for delivery (the car was collected by the new owner), a contribution to the cleaner's and driver's wage, fuel, insurance and security, title registration, storage and stock controlling.

No one is disputing that these are costs which a business needs to pass on to the consumer. The issue is that, as with other businesses, they should be factored into the purchase price, not carved out and slapped on the deal as padding.

Within minutes of my story about the Regulator's action against BMW Financial Services' on-the-road fee being published on TimesLive, a stream of reader e-mails hit my inbox.

Raoul Coscia of Cape Town said when he bought a new VW Tiguan in March, he was charged a "delivery fee" of R4503 despite driving it off the showroom floor.

And in researching a trade-in for a more rugged off-roader recently, a Joburg dealer sent him a quote which included an "on-the-road" fee of R5000, plus a further admin fee of R4200!

So here's the advice, as always: if you're buying a car, when presented with a quote, look for the on-the-road fee, or something similar - I wouldn't be surprised if dealerships are currently looking for another description - and ask for a breakdown.

Then refuse to pay for anything but licence and registration-related fees, and numberplates, if they are new. As long as there's a little fuel in the tank, you can have it filled yourself.

It's time the pricing of cars was more transparent.

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