Hidden extras cause delivery pains for buyers

“Delivery and related charges extra.” “Ex-works.” We’re familiar with such phrases, but what they mean is that the price quoted in adverts and on the windscreen of your new set of wheels in the dealership is, usually, not the final price you will pay.

Physically getting the car to the dealer from Dublin, Cork or Rosslare ports (other sea-going berths are available) will cost you extra, as will the final pre-delivery inspection (PDI). That covers the tasks of making sure your car has arrived without damage, with the correct colour and equipment, and that the oil and other fluids are topped off, the tyres are at the correct pressures and, basically, that everything is working as it should.

These are not expensive tasks, nor are they especially expensive to the customer. The issue is that they are, by and large, not mentioned until you sign on the dotted line. Why can we not just have the final, full, on-the-road price for our new car up-front and unobscured? It’s not that there’s a dramatic saving to be made, more that it’s an issue of transparency.

Certainly the National Consumer Authority (NCA) reckons so, and John Shine, director of commercial practice at the NCA says that “there is a requirement on all traders to display the prices of products on sale to consumers. The sale of cars is included within this requirement. The full price of cars for sale should be displayed by car dealers and garages, inclusive of any non-avoidable costs for delivery, number plates, etc.”

Clearly though, this isn’t always happening. The price quoted is generally the manufacturers’ recommended selling price (MSRP) and it’s up to the individual dealer to set the price for delivery and PDI.

Franchised dealers are independent traders and are free to charge whatever they fancy for delivery, and it’s up to the market economy to keep their costs in check.

We asked the Society of the Irish Motor Industry (SIMI) why a simple table of prices for delivery and extra charges couldn’t be made available. After all, SIMI represents pretty much all the major car importers and franchised dealers, so it should be simplicity itself to find out who’s charging what.

Suzanne Sheridan, press officer for SIMI agreed, saying that “the extra delivery cost shouldn’t be something the customer finds out at the last minute. Delivery costs aren’t included in manufacturer’s advertising because delivery costs vary from garage to garage. Pre-delivery work might vary in cost. Just like the price of the car (MSRP) the delivery cost should too be part of the negotiation process and the customer can shop around.”

Built-in charges

It would obviously be easier if the customer knew the total price but because, by law, prices can’t be fixed this isn’t possible. If the delivery charge was built-in, it would be subject to Vehicle Registration Tax (VRT) and could increase the price of the car. For example, €800 delivery at 18 per cent VRT is an extra €144 just for including it in the price.

The subject of price fixing often comes up when buying cars, and it’s usually quoted when someone tries to save themselves a bob or two by going abroad, purchasing the car in a jurisdiction where prices are lower and hoping that they can play the VRT game to their advantage.

Often you would hear rumours that overseas dealers were being told by car companies to jack up their delivery and sundry other costs in order to discourage such activity. Hearsay? Possibly, but sometimes even a rumour is enough.

What we’re looking for is not price-fixing though, but price transparency and a consistent attitude from car dealers when it comes to posting those prices. Whether those prices should differ from dealer to dealer is a contentious issue.

In fairness to dealers, most are working off a margin of around eight per cent on the MSRP of a new car, and if bullish customers come in with a perception that they’re going to get a 10 per cent discount or better, then a dealer has to have some extra pricing structure in place, or the car will be sold at a loss. Again though, transparency is everything.

In 1995, Fiat Ireland introduced a policy called “Open Book Pricing”. Fiat thrashed out an agreement with its dealer network that they would all charge a set price for delivery and PDI and then published a set of full, on-the-road prices. It was also tried, with some unfortunate consequences, by Opel in 1996 under the title of “Up- Front Pricing”. Significantly, no-one else took that approach, and that led to the plan being abandoned.

“The only reason we stopped doing open book was because we had hoped to set a precedent, but no-one else followed,” says Adrian Walsh, MD of Fiat Ireland.

“It was nothing to do with VRT, in fact Revenue were very happy with the system and liked the transparency of it, but it made our prices look, optically, somewhat higher than that of the competition in a very price-sensitive area of the market, so we dropped it.”

Oddly, this is a view at variance with some people who were part of the Fiat organisation at the time and who have since left the company, who aver that it was the Competition Authority who smelled a price-fixing rat, and ordered the programme shut down. Who is correct? Hard to tell at this remove, but it’s clear that the pricing of delivery and related charges can cause rancour.

It’s certain that Opel’s “Up-Front” pricing strategy was stopped by the Competition Authority back in 1997, which even went as far as raiding Opel’s offices to seize files – the documents relating to it are in the public domain, but the Fiat situation seems to be more cloudy, and down to the recollection of individuals.

There should really be no major difference in getting a car to one dealer or another. Yes, costs of transport, or local rates or rent costs or whatever can vary for individual dealers, but they should balance out. Perhaps the Irish car trade as a group, importers and dealers alike, should simply develop a standardised price for delivery and related charges.

If VRT really is an issue, then don’t add it to the price of the car, but display it clearly in the dealership. If all that proves impossible, then at least can we have the individual charges listed and published so that consumers can make an informed decision?