WENDY KNOWLER | Here’s hoping that, come April, that ‘on-the-road’ fee will be on the curb

April 14, 2021. 

That’s the day VW Financial Services’ appeal against the National Consumer Tribunal’s ruling — that most of the fees motor dealerships routinely add to financed car deals are illegal — will be heard in the high court.

I’m awaiting that decision more than a little eagerly, because every week I hear from people who are buying a car, have spotted that “on-the-road” lump-sum fee — otherwise referred to as a dealership or “delivery” fee — on their contracts, then e-mail me to say: “But I thought that had been outlawed?”

And then I have to tell them it is true that almost two years ago thetribunal ruled that the National Credit Regulator was correct in finding VW Financial Services (and by implication all other vehicle finance houses) was wrong to add the “on-the-road” fee to its contracts, but that the ruling was appealed, so the dealerships and the banks which finance those deals have continued to charge those fees.

Some dealership groups refer to the fee as “mandatory”, thereby telling their customers: “Don’t even think of trying to negotiate with us about that.”

The National Credit Act (NCA) prohibits anything extra being charged for, other than 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.

So no “admin” fees, car-checking fee, washing-the-car fee or any other padding which dealerships see fit to add to financed deals instead of building them in to the advertised cost of the car.

As I’ve been saying for years, the issue is not that dealerships are passing on their costs to their customers, it’s that those costs ought to be included in the purchase price, not slapped on as an extra at offer-to-purchase stage.

Worse still, they are not transparent about it.

They never break it down that “delivery” fee on the documentation — consumers only get full disclosure, well, disclosure of sorts, more like, if they ask for it.

The legal battle applies only to financed deals, but to my mind it’s also unjustified and downright nasty on cash deals. There’s an awful lack of transparency around these charges.

A typical example:

Bernard Hellberg bought a car at a Pretoria dealership, Suzuki Montana, part of the Penta Motor Group. Among the deal add-ons were a delivery fee of R3,230 and a licensing and registration fee of R2,200.

First-time registration of the SUV was R180 and the annual licensing fee was R480. Total: R660.

That leaves a difference of R1,540 to cover what the Credit Act allows for — getting a runner to stand in the queue and get it done for him. As for the additional “delivery fee” of R3,230, Hellberg was told that was for registration, administration, backing plates, fuel, carpets, key rings and R2,156 worth of “prep”.

When he demanded to know what “prep”, he was told engine oil, water and antifreeze had to be added to the vehicle.

But the cars already have their engine fluids when they arrive in SA, because they are driven off ships.

Which begs the question, what “prep”? A pre-delivery inspection? Any new product should be tested thoroughly before being put up for sale to ensure it meets quality standards. It should not be an extra charge and the NCA specifically precludes this. The Penta group’s attorney responded to my query with the following points:

• Hellberg bought his vehicle cash, so the NCA does not apply.

True, but the dealership fee is applied whether a deal is cash or financed.

• Dealerships work on recommended retail prices from the vehicle manufacturers, which do not provide for any of the charges and costs associated with licensing and delivery of the vehicle to a customer;

• The dealership’s fee is well within what the financing banks will allow; and

• “Prep” covers many things, including: 

• The removal of protective films and covers;
• Washing the vehicle;
• Installing the antenna and spare wheel;
• Performing various checks;
• Tuning and setting radio frequencies to local stations;
• Adjustment of seats and mirrors;
• Adjusting the tyre pressure; and
• Checking and topping up consumables and fluids.

“The labour cost exceeds the cost of the ‘prep’ component under the delivery fee,” the attorney said. “The dealership therefore absorbs some of the cost as a goodwill gesture.”

Ah, right, so far from fleecing their customers with these extra fees, they’re giving them a luck!

As for the licensing and registration fee, the attorney said it included supplying and affixing the number plates, a fast-track fee, administration fees and a licence disc holder.

Last week Tim shared with me e-mail correspondence he’d had with a salesman working for one of the country’s biggest motor dealership groups, CMH.

The salesperson told him that a R4,950 “documentation fee” was a “charge across the group”, then added: “There is other stuff like smash-and-grab and ‘2in1’ (a paint protector product), which is also mandatory, but I will remove it and take the swearing from my boss.”

Mandatory??!! I took that up with the dealer principal of that Pinetown, KZN, dealership, and he came back to me to say:

“All charges on our offer-to-purchase documentation, both in respect of the vehicle and the extras, are negotiated with the customer. No charge is mandatory. One of the products which we offer to customers is called ‘2in1’. This is a CMH Autocare paint sealant and interior protection.”

So when it comes to the “delivery fee”, demand a full breakdown and negotiate, hard.

And hopefully in April the appeal will fail and all those extra fees will have be built into the purchase price, as happens in other industries. 

CONTACT WENDY: E-mail: consumer@knowler.co.zaTwitter: @wendyknowlerFacebook: wendyknowlerconsumer