Car prices: what you see is not what you pay

“On the road” charges for cars are back in the spot­light, with a new book al­leg­ing deal­ers are fla­grantly pad­ding credit agree­ments and prof­it­ing hand­somely from the prac­tice. re­ports

Pretoria News Weekend - - NEWS -

LAST year, the Na­tional Credit Reg­u­la­tor (NCR) launched an in­ves­ti­ga­tion into on-the-road fees charged when you buy a car through a deal­er­ship’s fi­nance house, and found the charges con­tra­vened the Na­tional Credit Act (NCA).

In Oc­to­ber, the reg­u­la­tor acted, is­su­ing a com­pli­ance no­tice against Volk­swa­gen’s fi­nance house, VWFS, for on-the-road fees, three weeks af­ter it had is­sued a sim­i­lar no­tice against BMW Fi­nan­cial Ser­vices for pad­ding the costs of its ve­hi­cles, and or­dered it to re­fund cus­tomers.

VW had charged be­tween R3 000 and R4 000 ex­tra per ve­hi­cle, while BMW was hik­ing costs by be­tween R3 000 and R6 000.

In an­nounc­ing the com­pli­ance no­tice, the reg­u­la­tor said it was tak­ing ac­tion against VWFS for charg­ing con­sumers an on-the-road fee, ad­min­is­tra­tion fee and han­dling fee on credit agree­ments.

“These fees are not per­mit­ted to be charged on credit agree­ments by the NCA. The Act al­lows con­sumers to be given a quo­ta­tion which sets out the cost of credit, be­fore sign­ing credit agree­ments. Con­sumers should re­quest this quo­ta­tion from their credit providers so that they can prop­erly check the cost of credit that is be­ing of­fered,” said Nomsa Mot­she­gare, the chief ex­ec­u­tive of the NCR.

“The NCR will con­tinue to con­duct in­dus­try-wide in­ves­ti­ga­tions on the cost of credit, to root out il­le­gal charges and fees that con­sumers are charged. Credit providers are re­minded that it is a crim­i­nal of­fence to charge con­sumers fees and charges that are pro­hib­ited by the Na­tional Credit Amend­ment Act of March 2014.”

Both man­u­fac­tur­ers plan to take up the mat­ter with the Na­tional Con­sumer Tri­bunal.

Mark Hunt, the head of brand and mar­ket­ing at VWFS, said: “[We hold] a dif­fer­ent view on the le­gal in­ter­pre­ta­tion of the ap­pli­ca­ble pro­vi­sions of the NCA. VWFS is in the process of lodg­ing its ob­jec­tion and will re­quest that the tri­bunal re­view the com­pli­ance no­tice.”

BMW Group’s com­mu­ni­ca­tions man­ager, Edward Mak­wana, said: “(BMW Fi­nan­cial Ser­vices) dis­agreed with and dis­puted the con­tents of the no­tice is­sued by the NCR in 2017, and filed an ob­jec­tion to the no­tice. BMW Fi­nan­cial Ser­vices is await­ing a date for the mat­ter to be heard at a tri­bunal.”

De­spite these com­pli­ance no­tices and the fact the fees are il­le­gal, deal­er­ships are still rou­tinely adding them onto sales, ac­cord­ing to a new book, Eff You Very Much – how you are screwed by deal­er­ships and banks when buy­ing a car. It’s an un­savoury ti­tle for a sor­did tale.

The au­thors, Crys­tal Slab­bert and John Tit­mus say they were alerted to the il­le­gal­ity of most on-the-road fees when lis­ten­ing to a ra­dio show while on hol­i­day. When they re­turned to their re­spec­tive homes in Port El­iz­a­beth and Jeffreys Bay, the cit­i­zen jour­nal­ists started con­duct­ing their own re­search and re­alised the prac­tice was rife in the in­dus­try.

Un­der the NCA, al­low­able “ex­tras” in­clude ini­ti­a­tion fees, fuel, de­liv­ery costs, ex­tended war­ranties, and li­cence and reg­is­tra­tion fees, but deal­er­ships were boost­ing credit agree­ments with ad­di­tional com­mis­sions and costs for “gifts”, such as flow­ers and key tags, and clean­ing, which are pro­hib­ited.

Slab­bert and Tit­mus say that, con­ser­va­tively, deal­er­ships are rak­ing in over R6 bil­lion a year from these fees (cal­cu­lated at an av­er­age of R2 900 per ve­hi­cle mul­ti­plied by 1.9 mil­lion cars sold).

Vet­eran ar­bi­tra­tor Duon Oden­daal of SA Con­sumer Com­plaints has thrown his weight be­hind the book, say­ing it de­tails the is­sues his clients have raised over many years.

The book out­lines how the mo­tor deal­er­ships are charg­ing “il­le­gal” costs and claims they are in col­lu­sion with the bank­ing in­dus­try.

Ac­cord­ing to the NCA and the Con­sumer Pro­tec­tion Act, the only fees that deal­er­ships are al­lowed to charge for are reg­is­tra­tion, li­cens­ing, num­ber plates and fuel. They are not al­lowed to make any profit on third-party add-ons, such as ve­hi­cle pro­tec­tion prod­ucts.

“These il­le­gal fees they are charg­ing range from R2 500 to R9 000. In­cluded in these fees you will find pre-de­liv­ery in­spec­tion (which the fac­tory is billed for), key rings, your bot­tle of cham­pagne, back­ing plates (which they ad­ver­tise on), re­mov­ing the ve­hi­cle from the truck, on-the-floor park­ing, cre­at­ing an in­voice, among other things. These are all run­ning costs that the deal­er­ship should carry, but are sim­ply passed on to the con­sumer,” Slab­bert says.

They found in­stances where the deal­er­ship charged R4 200 for smash-and-grab win­dow pro­tec­tion, whereas the ac­tual price is R1 400.

“When you go to Pick n Pay or Wool­lies, you see a price tag and that is what you pay. All op­er­at­ing costs have been added into that. You don’t get to the till and all of a sud­den you are charged for the use of the trol­ley/bas­ket or the till slip,” Slab­bert says. “This does not hap­pen at the deal­er­ships. The price on the tag is not what you pay due to all of these il­le­gal costs. This needs to stop, and the cus­tomers need to get their money back.

“We are busy work­ing on a clas­s­ac­tion law­suit, where we will fight to get cus­tomers their ‘il­le­gal’ costs back. It’s on a no-win, no-pay ba­sis, so any­one in­ter­ested in join­ing the suit has noth­ing to lose.”

When you go to Pick n Pay or Wool­lies, you see a price tag and that is what you pay. All op­er­at­ing costs have been added into that. You don’t get to the till and all of a sud­den you are charged for the use of the trol­ley/bas­ket or the till slip.

‘ELECT TO PAY UP­FRONT’

Avitha No­fal, the se­nior le­gal ad­viser at the Credit Om­bud, says: “On-the-road fees gen­er­ally in­clude costs such as reg­is­tra­tion and li­cence fees, petrol, pre-de­liv­ery checks, the cer­tifi­cate of road­wor­thi­ness and valet costs. These are costs that con­sumers may elect to pay for up­front.

“The NCA sets out that credit providers must dis­close and ex­plain the to­tal cost of credit to con­sumers and pro­hibits credit providers from charg­ing credit fees or charges that are pro­hib­ited by the Act.

“The to­tal cost of credit in­cludes the prin­ci­pal debt, in­ter­est, ini­ti­a­tion fee, ser­vice fee, credit in­surance, de­fault ad­min­is­tra­tion charges and col­lec­tion costs.

“The Act makes pro­vi­sion for credit providers to furnish con­sumers with pre-agree­ment state­ments and quo­ta­tions. Con­sumers should take ad­van­tage of this by check­ing the cost of credit be­fore sign­ing the credit agree­ment.

“The Credit Om­bud in­ves­ti­gates com­plaints from con­sumers who are neg­a­tively im­pacted by credit bureau in­for­ma­tion and/or is­sues re­lat­ing to non-bank credit agree­ments. Should a con­sumer find that their credit agree­ment with a non-bank mo­tor ve­hi­cle credit provider re­flects on-the-road fees within the to­tal cost of the credit, or any other amounts that they wish to dis­pute, the con­sumer may ap­proach the Credit Om­bud.

“The of­fice would look at the credit agree­ment to de­ter­mine whether the con­tract was valid. If valid, we would look at the in­ter­est and fees charged to as­cer­tain whether they were com­pli­ant with the Act. The credit provider would be con­tacted, and fur­ther in­ves­ti­ga­tions would en­sue.”

The NCR failed to re­spond to re­peated re­quests for com­ment about the fees, the book, why deal­er­ships are still flout­ing the law, and the sta­tus of its in­ves­ti­ga­tion.

Jo­han van Vre­den, the Mo­tor­ing Om­buds­man, says: “We have stud­ied the con­tents of the book and found a num­ber of dis­crep­an­cies... We fur­ther… are of the opin­ion that the con­tents will only lead to con­fuse con­sumers… The Mo­tor­ing Om­buds­man can­not com­ment on on-the-road fees, as this falls within the man­date of the Credit Om­bud, Bank­ing Om­bud and the NCR.”

Gary McCraw, the com­pany sec­re­tary of the Re­tail Mo­tor In­dus­try (RMI) who also heads the Na­tional Au­to­mo­bile Deal­ers’ As­so­ci­a­tion, says: “The RMI has re­ceived a copy of the book re­ferred to in your email and is in the process of re­view­ing the con­tent thereof. We are there­fore not at this stage in a po­si­tion to re­spond.”

The Bank­ing As­so­ci­a­tion of South Africa’s Cas Coova­dia re­quested more time to look into the al­le­ga­tions be­fore re­spond­ing.

• Eff You Very Much is avail­able at www.effy­ou­very­much.com, and at Fog­a­rty’s, Bargain Books and Ama­zon for R120.

ge­orgina.crouth@inl.co.za

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