Tim O'Brien | May 18, 2009

From May 25, under an enforceable ruling from the ACCC, new cars sold in Australia will have to clearly display the ‘drive-away’ price of vehicles advertised and on display.

While some manufacturers such as Hyundai, and more recently Holden, Mitsubishi and Chrylser Jeep (among others) have made ‘drive-away’ pricing a feature of their advertising, now all new car manufacturers and dealers will have to follow suit.

Under the "clarity in pricing" amendments to the Trade Practices Act, businesses must ‘prominently display’ the total price of the item offered for sale, including all components and surcharges.

This is to take effect from the 25th May, and will be overseen and enforced by the ACCC.

hyundai_getz_01

What this means is that car and motorcycle companies and dealers will not be able to advertise a vehicle – a new car or motorcycle - showing a price “plus on-road costs”.

They must now clearly show the drive-away price, which will include the ‘on-roads’ components of dealer delivery, registration, stamp duty, compulsory third party insurance and any other charges.

The ACCC ruling does not only apply to the motor industry: events ticketing will have to show booking fees; travel packages will have to show total prices including flights, transfers, and other charges; car rental firms will not now be able to advertise a price per day, but then add a surcharge for kilometres driven; and even restaurants adding surcharges to menu prices on public holidays will be affected.

While the ACCC ruling does not disallow the use of component pricing, it does however require the total price of the product (including all components) to be displayed as prominently as the price of any one component.

"The new law will not only mean consumers have accurate price information, but also that businesses have a more level playing field on which to compete when it comes to price representations," ACCC Chairman Graeme Samuel, said.

Ford FG Falcon

For most car-buyers, the new ruling makes sense. Now, an advertised sticker price will represent the full cost of purchase.

There have been a few daft reports about this recently; one that appeared in a prominent metropolitan daily stated incorrectly that car prices would “go up” - which is simply not the case. If anything, the new ruling will exert downward pressure on drive-away prices, particularly in the price-sensitive sub-$30k buyer segments.

There will be some sticker shock though, especially for some of the more expensive marques – some of whom have long and expensive ‘menus’ of components that sit on the base price.

Cars in the $20k to $30k price range will potentially show a sticker price increase of around $3000-$4000, but more expensive purchases will show larger sticker price increases. The reality is however that buyers will not be paying more to get the car on the road.

For most car buyers, this ruling by the ACCC is likely to have strong support. Especially among those who have found their budgets stretched to breaking when adding in the ‘on-roads’ components and other charges.

holden-dealer-australia

The Federal Chamber of Automotive Industries (FCAI) is worried that there will be some difficulties applying the ruling across state borders. “They (ACCC) have left us with some difficult loose ends. There now has to be some fancy footwork to resolve the issues,” Andrew McKellar, Chief Executive of FCAI told News Ltd.

As stamp duty and other regulatory charges vary from state to state, car companies will have difficulty advertising a ‘drive-away’ price in a national promotion. And a small slip could see them in very hot water.

So, the states have their parts to play if this ruling is to work. In our view, it is high time there was harmonisation across state borders on registration, stamp duties, third party insurance and other regulatory charges.

(And incidentally, with the GST already added into the cost of the car, it is also high time the states did away with stamp duty on vehicle purchases, which sits on top of the GST and is effectively a tax on a tax.)