"For my sins, I was involved in a car-buying nightmare process late last month. After buying and, crucially, financing three previous vehicles (one in those heady days before the National Credit Act!), I’d like to think I’ve finally figured out the upsells, unnecessary – and sometimes hidden – charges and things you should generally say ‘no’ to.
This wasn’t a particularly tricky purchase: the only ‘complexity’ was that this used vehicle was a different marque (something French) to the dealership (something German).
Imagine my surprise when the invoice the dealer tried to present to me for financing differed by more than 12% from the original quote. And this wasn’t an administrative oversight, or forgotten on-the-road charges (or VAT) or anything like that…
This ‘reputable’ dealer tried to invoice me R4 000 for ‘smash-and-grab’ protection which the car already had fitted! It also tried to invoice me another R5 000 for a tracking device, which also already existed! “Oh, sorry, it’s the system,” was the best excuse the finance ‘specialist’ could muster when I questioned these blatant rip-offs.
Double-dipping aside, the margins dealers charge on these extras (even when they are valid) are eye-watering. The smash-and-grab fitment price ‘quoted’ is at least double what you’d pay if you went direct. And with tracking devices, the ethics are even more questionable: on every single tracking option I’ve researched, you’ll get a device for free if you sign up to a subscription (much like a mobile phone contract). There are also ‘cash options’ which, again, translate to a markup of close to 100% for the dealer. (And don’t discount the ‘incentives’ available to dealers for installing these devices and getting your subscription activated.)
The inflation of ‘on-the-road’ fees in recent years makes food price increases seem benign. Nowadays, you’re easily paying close to R5 000 for nothing more than licence registration (which dealers do in bulk!). Even the obligatory ‘free’ tank of fuel has morphed into half a tank. I’m not suggesting dealers shouldn’t charge this fee, but R4 500?
Also on this fantastical invoice was line item after line item of insurance: tyre protection (?!), paint protection, minor dent protection, a third-party maintenance plan (the car already has the remainder of its maintenance plan in place!) and something you should be used to seeing on any credit agreement, ‘credit protection’. Never mind that your comprehensive insurance cover – which is mandatory when financing a vehicle – will cover much of the above (apart from the maintenance and shortfall cover).
Some of these, the ‘specialist’ noted, were related to the marque’s ‘in-house’ financial services offering which the dealer insisted be used. One couldn’t, they said, use Wesbank directly, as the FirstRand-owned asset finance outfit was the joint venture partner for the marque’s financial services business (another story for another day). Here, again, saw an absurd (>200%) mark-up on what’s become a fairly standard fee: finance initiation.
But, after nearly a week of toing-and-froing and arguing, the dealer (and the bank) relented and allowed the direct finance of the car (with a ‘clean’ invoice, containing the purchase price and only on-the-road charges).
Thing is, the typical buyer doesn’t realise they’re paying significantly more for their car than what they first thought. A 10% (or more!) difference in the purchase price is easy to obfuscate during the finance process. The difference in monthly installment is ‘only’ a few hundred rand, so you simply won’t realise that you’re paying this much more.
Not only does the typical buyer likely not understand much of what they’re signing (trust me, they don’t), but buying a car is such an emotional purchase that it’s easy to get ‘caught up’ in the moment. Heck, even I did three years ago when I bought my last car… And I’m stuck having paid for ‘paint protection’ that no one can tell me how to use!
Dealers are – rightfully – absolutely petrified of the Consumer Protection Act and National Credit Act (on paper at least). You’re made to sign acceptance after acceptance that items were ‘disclosed’ to you and that you weren’t ‘forced’ into anything. But, in a typical half-hour marathon of signing forms, these acceptances blur into a wad of stapled paper. Again, the typical buyer has no idea what they’re signing.
Even after I made it clear that none of these extras would be invoiced, the dealership had the temerity to try and sell credit protection (shortfall cover) on the day of delivery. And, despite yet another round of not-so-polite declines, the selling continued with a cold call from the dealership days later, hawking (guess what!) insurance and credit protection.
This experience is not an isolated one. At all. Vehicle sales have become an outright racket! Sales people have become order-takers who chuck customers over to finance and insurance (‘F&I’, to use the industry lingo) departments as if they were hot potatoes. This also gives the sales people useful cover: there’s someone else entirely to blame for practically everything as they ‘don’t quite understand that process’. Yet the same sales people lament how “quiet” business is this year, and how “tough” sales are…
I’m bearish on motor retail for no other reason but because I believe the process is fundamentally broken. No one is incentivised correctly. Customers buying incredibly high value items – often the second-largest purchase they’ll ever make – are being hoodwinked into paying for things they don’t need. And, despite how emotive buying a car is, it’s slowly becoming a grudge purchase. No one I’ve spoken to in years has found it pleasant and transparent.
It’s no wonder Tesla has upended the motor dealership sector in the US. Sales people are not incentivised on deals (cough!) and Tesla owns its stores (not quite dealerships) and service centres directly. I was fortunate enough to visit one last year in Palo Alto, and you can tell why Elon Musk is intent on retaining control of the customer experience. The notion of truly putting the customer first is almost completely foreign to existing players (yet, their websites and brochures will be filled with gibberish about ‘pillars’ and ‘people’ and ‘ethics’). ‘Loyalty’ is virtually inconceivable. Until the (legacy?) major motor manufacturers and their retail partners figure out a better model, that animosity between customers and dealers is simply going to grow…"
