As good as new

Some de­mon­stra­tors haven’t even gone around the block

Herald Sun - Motoring - - FRONT PAGE - JOSHUA DOWL­ING NA­TIONAL MO­TOR­ING EDI­TOR joshua.dowl­

WANT to save thou­sands by buy­ing a “de­mon­stra­tor” new car? It pays to shop around and ask some key ques­tions to make sure you’re not pay­ing over the odds.

The term “de­mon­stra­tor” is now used to de­scribe dif­fer­ent types of new or near-new cars. Most demo deals are stacked in the buyer’s favour — but some are not.

His­tor­i­cally, the term was used to de­scribe a near-new ve­hi­cle driven by dealer staff for a few months and used by cus­tomers to test drive around the block.

In most cases it’s part of a dealer’s con­tract with the man­u­fac­turer to run a min­i­mum fleet of de­mon­stra­tors with a va­ri­ety of pop­u­lar mod­els.

The man­u­fac­turer gives deal­ers a spe­cific “bonus” or con­tri­bu­tion to run each demo ve­hi­cle, usu­ally $350-$1500 on cars priced be­tween $15,000 and $50,000.

A hatch­back priced at $20,000-$25,000 usu­ally has a demo bonus of $600 to $750, although these fig­ures vary by brand and are a guide only.

The best time to buy a gen­uine dealer demo is when the car is near­ing the end of its two or three-month run.

Most deal­ers keep a car for at least 45 days to se­cure the demo bonus but they want to clear it within 60 days or so, to en­sure it’s still sold with plenty of reg­is­tra­tion and warranty cov­er­age.

Deal­ers cus­tom­ar­ily want to “flip” demo mod­els reg­u­larly, which means there are al­most al­ways some in stock — although not al­ways on ev­ery model.

What makes them good buys is the deal­ers’ prac­tice of writ­ing down the cost of the car each month.

For ex­am­ple, a Toy­ota Corolla that’s al­ready on spe­cial at $23,990 drive-away (about off the full RRP) might be let go for $21,990 drive-away when it gets to two to three months old. That brings the to­tal sav­ing to $5000 off the full RRP and $2000 off the al­ready dis­counted price.

In this ex­am­ple the dealer is tear­ing up money be­yond the “bonus” paid by the man­u­fac­turer.

Deal­ers view this as a cost of do­ing busi­ness and the deals vary de­pend­ing on how des­per­ate they are to move me­tal. In most states, a car is no longer re­garded as a de­mon­stra­tor once it has more than 5000km on the odome­ter, which is another in­cen­tive for deal­ers — more than this and it is re­garded as a used car.

But now a new type of de­mon­stra­tor model is in­creas­ing in pop­u­lar­ity. The term has broad­ened to in­clude new cars that have not been driven or reg­is­tered.

The sav­ings can be mas­sive and you’re still get­ting a brand$3000 new car. You need to ask some im­por­tant ques­tions to en­sure you’re not be­ing short-changed.

First, some back­ground. As man­u­fac­tur­ers rou­tinely chase sales tar­gets, the more des­per­ate they are to in­crease monthly, quar­terly and end of year bonuses to deal­ers. In some cases the cash in­cen­tives are of­fered in the fi­nal days of the month.

To get an ex­tra, say, $2000 off a $30,000 car, the dealer must agree to take a large

al­lo­ca­tion of ve­hi­cles and de­clare them as sold — even if there aren’t any cus­tomer names on them.

These are known as “called” cars, be­cause the man­u­fac­turer can de­clare them as sold to the Fed­eral Cham­ber of Au­to­mo­tive In­dus­tries, which is­sues monthly sales data.

Deal­ers in­creas­ingly re­fer to these ve­hi­cles as “demo mod­els” or “un­driven de­mon­stra­tors”.

On con­ser­va­tive es­ti­mates, at least 10 per cent of cars re­ported as sold in a given month are still sit­ting in dealer stock, brand new.

One metropoli­tan mul­ti­fran­chise dealer, speak­ing on con­di­tion of anonymity, says he had more than 100 “called cars” from sev­eral brands at the end of July.

He is des­per­ate to sell them be­cause he knows the same deals are likely to ap­pear at the end of this month or next, in a never-end­ing cy­cle.

If he doesn’t take a large al­lo­ca­tion of “called” cars, then he risks be­ing un­com­pet­i­tive with deal­er­ships rep­re­sent­ing the same brands in neigh­bour­ing sub­urbs.

It’s a big win for buy­ers but they should heed a warn­ing.

Warranty cov­er­age should not start un­til the day a new car is first reg­is­tered but sales soft­ware is con­fig­ured to start the warranty when the car is de­clared as sold.

This has left some buy­ers with less warranty than they were ex­pect­ing. Cars­guide has found ex­am­ples of cars re­ported as sold up to 18 months be­fore they were first reg­is­tered (although most get sold within six months).

The con­sumer watch­dog is now look­ing at the warranty pe­ri­ods of called cars.

Man­u­fac­tur­ers are now chang­ing the mon­i­tor­ing of warranty cov­er­age.

Some brands al­low the dealer to re­set the warranty ac­cord­ing to the date of reg­is­tra­tion.

Other brands make a writ­ten note of when the car was de­liv­ered and take it into con­sid­er­a­tion if a claim is made out­side of the warranty pe­riod. They may still ar­gue, how­ever, that the warranty ap­plies to the date the car was de­clared rather than when it was sold.

The in­dus­try is try­ing to clean up its act to avoid closer scru­tiny by the Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion and fair trad­ing au­thor­i­ties. Tighter reg­u­la­tion is an­tic­i­pated soon.

If you’re hunt­ing for a de­mon­stra­tor, be sure to ask plenty of ques­tions to es­tab­lish ex­actly what you’re buy­ing, then com­pare prices at sev­eral deal­er­ships.

This week, Cars­guide un­earthed ex­am­ples of nearnew cars la­belled as deal­er­driven de­mon­stra­tors that were dearer than brand-spank­ing new cars.

The “de­mon­stra­tor” plac­ard on the wind­screen doesn’t al­ways equate to a mas­sive dis­count. View it as a cue to delve at the deal­er­ship as to what you’re get­ting.





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