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Car prices: What you have to say

2004-05-13 12:09

John Oxley

CLICK HERE for John Oxley's article: Car Prices: Govt, banks also to blame

From John Brink

I am one person who is really glad and happy that they are investigating these companies. I think it would be a positive boost for the economy when car prices comes down maybe. Our South African Car manufacturers are like the OPEC cartel.

If you take car insurance is based on the value of the car. If the cars become cheaper you will have more cash in your pocket.

You will be able to pay your insurance access when you bump your car, which in turn gives work to your local panel shop. Tourism will benefit with car rentals/insurance because the tourist will have more money to spend on his holiday.

If you look most of these companies belong to the same holding company who also owns the care rental companies. They "Sell" their product to "their" car rental company. Who pays for these cars - we the customer when renting a car.

From Randal Albertus

have read the article about the car prices: Government, banks also to blame. I do agree with most of what is said, but I disagree completely with the fact that car allowances are contributing that much to the sale of "expensive cars".

I get a car allowance and I think that I deserve it. I studied for eight years and now work for Sasol. After all that studying I certainly need the return on investment I made during my years at university. And I think that a car allowance only really benefit the employee when the tax rebate is applied.

And when a person gets to the point of getting a car allowance, surely he is paid enough to afford the car.

Many of my colleagues do not buy very expensive cars because they cannot afford the cars that their allowance provides for. And that leads to them having to pay in to SARS the amount because they do not use their company asset.

The company gets the tax back for giving car allowances. That means that the employee should make use of that.

But the high prices are only a symptom of a greater illness in the motor industry. And I think we as South Africans have been left out of sinc with the rest of the world for so long that we are not only uninformed, but also too hungry to get to the level of showing that we have made it.

And manufacturers can see this. So now we sit in a country where customer service is up to crap. I think the worst in the world because we just take the bad service and keep quiet and go back to the same establishment because we don't want to "change".

So now we sit with two problems. We are already paying too much for the car, now we have to also cope with bad service from the car manufacturers.

I know what Mercedes Benz's service is like and it is to my opinion not good at all. The same goes for most of the other car manufacturers like Toyota, VW, Opel etc. I am now driving an Audi and the services I get from them are much more improved.

It comes at a price, but I did not pay nearly as much for a similar model BMW or Benz. And the included freeway plan is also very good.

My car went in for a service and it cost almost R3 000. I did not even pay a cent.

I might be one of the lucky ones.

From Shumani Gereda

My name is Shumani. I write here to commend you on the wonderful job you did, in publishing the subject. It is quite an informative piece of reading.

I particularly like the part on import/export and the Competition Commission (CC). You will remember that the CC?s regulatory mechanism is ex post (after the fact) as opposed to ex ante (before the fact).

The difficulty with the ex post mechanism is that the CC is not able to instill a sustainable competitive behavior upon the car manufacturers. As an after the fact regulator they can only find Toyota guilty and them without creating general guidelines that would apply to all car manufacturers.

Hence you mentioned the involvement of government. The DTI is in a better position to pioneer some kind of policy that would regulate (ex ante) the pricing of cars. What the CC is able to do, in the meantime, is to instill some kind of fear of retribution in car manufacturers.

We both know that R12-million is not enough to cleanse Toyota of all the resale price maintenances they committed in the past. If anything, it is a drop in an ocean.

However, a lot of people stand to lose dearly if the DTI were to institute such a policy, and as such there would be stalling until we all get used to the high prices. I also like the quotation about prices being determined by what consumers are prepared to pay instead of their worth.

If you read the Sunday paper you will recall that South African millionaires are wealthier than the SADC region put together. That might explain why car manufacturers are getting away with the crime ? if they can afford why bother.

Great article you wrote there

Thank you - JO

From Charles Pool

Interesting article that certainly has a lot of valid points.

I however find it quite interesting that the fact that the UK has the highest car prices in Europe and quite possibly the world was not mentioned.

Effectively comparing 'apples with apples' we have car prices that are equal to one of the most expensive places in the world.

They are also trying to reduce the number of cars drastically via various economic methods.

If we are comparing 'apples with apples', what are the duties and taxes charged on the UK cars?

You appear to have a very interesting method of comparing 'apples with apples'.

The interesting question is why is the author defending the car prices?

Interestingly, I wrote this article to try to get away from the high emotion that seems to permeate most articles and comments that have been written on this subject lately.

When I did my comparisons I expected SA prices to be higher than the overseas prices, and the results were as much a surprise to me as to anyone else.

I chose the UK because it was easy to get information on pricing, not for any other reason. And the cars sold there are right-hand-drive, so there IS a large element of "apples with apples".

In a leading article in a Johannesburg newspaper on Tuesday the writer claimed that "you can buy a good house in Johannesburg for the price of a good car".

That's the sort of emotional claptrap I was trying to avoid. A Mercedes C180K, at R250 000 is a "good car". But I defy anyone to show me "a good house" in Joburg - or most other places in SA - at that price.

Perhaps the real problem is that our purchasing power in SA is not high enough.

If we accept that some car prices are more or less constant throughout the world, and it takes a Brit 3 months' salary to buy a car and a South African 18 months, maybe we're not getting paid enough! - JO

From Anton de Bruyn

I've just read your evaluation - and indeed your comparisons are better than most (as you say, 'comparing apples with apples'). The conclusion might be drawn that our car prices are not as inflated as we thought.

However, I have 3 observations which could sway the decision.

Comparing our car prices with UK prices is comparing one highly inflated market with another.

Any Brit new car buyer with a bit of gumption orders his car in Belgium and saves 15 - 30% depending on the make/model. If the Brit is a little less enterprising they can buy existing stock from a UK 'Superdealer' at 15 - 20% saving.

Lastly, they can walk into a showroom and 'make an offer' on a new car (specially a run-out model on the floor). These market forces have resulted in UK car prices dropping annually. Certainly, retailers are much more flexible in UK than here.

A further bugbear (in SA) is the phenomena of 'fleet discount'. In my experience these are not a 'bulk order'. Its merely a single car order from a Company - no binding contract exists to buy only one brand of vehicle.

Why is the man-in-the-street refused a fleet discount - clearly discrimination. The constitution definitely makes this illegal.

Lastly (although not a tax expert) my experience is there is no 'tax incentive' when a car is bought 'through a company'. 1,8% of the value of the purchase is considered a taxable perk. If the finance period is short, the operator must buy the vehicle from the company to retain use.

Then he is taxed on the difference of real value are 'transfer value'. Car allowances are apparently controlled via log-books to record what business was done on each trip. Where no records are maintained, the first 20000km are considered 'private' - and the allowance is fully taxed.

I think the truism you quote is that prices are set according to what purchasers will pay. However, the public's 'lack of discernment' is a direct result of the control exercised by manufacturers, import-duties and agency agreements - not to forget an 'unquestioning press'.

I think your last comment is a low blow - it was the Media that brought this issue to the CC's attention - JO

From Pierre van Dalen

Although I found your article "Car prices: Govt, banks also to blame" to be very informative, I just want to point out that the final assembly of the Chrysler Crossfire takes place at the German coachbuilder Karmann's plant in Osnabruck in Germany and not in the USA.

Therefore your statement that shipping of the Crossfire to the UK and SA should cost round about the same is invalid.

Comparing the Crossfire's price in the US (which includes shipping across the Atlantic and starts from $29 920 i.e. less than R210k!!!) to its local price would be more appropriate and even more newsworthy.

The big problem is that US Crossfires are left-hand-drive: it is illegal to import LHD vehicles into SA - JO

From Neil Obermeyer

I am not totally convinced of John Oxley's comments regarding car allowances and the bank's having an influence on car prices.

I also wish that respectable people like Mr. Oxley would not advocate for car allowances to be done away with.

My personal view is that car allowances and the insurance industry (crime) is the two major factors keeping car sales (across the board) alive and well in this country.

The argument that all people with allowances utilise them to the full is totally false.

People also have bonds and other expenses to pay and most would rather utilise the cash for these purposes. With regard to commissions paid by banks: If you do not do your homework as a consumer/buyer you are always going to pay for it.

No Mr. Oxley its all about supply and demand, the only person always to blame for any excessive price in a market is the demander/consumer, especially in the motor vehicle market.

Yes, I agree with your closing comments - which is how I opened my story in the first place.

Car allowances and company cars ARE contributing to maintenance of high demand by making money available to buy expensive cars.

The only thing I advocate in my story is for more transparency from the motor industry, and for the competitions commission to widen its scope to include other facets. I do not advocate doing away with car allowances, but merely comment on what is. - JO

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