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Provision for Price Variation on New Car Contract

Today, I went to my local Kia dealer with a view to purchasing a new 2020-model Kia Cerato. I’m after a base model with metallic paint - the latter could result in delayed delivery, which does not bother me. This will be my first purchase of a new vehicle.

There were a few items in the conversation which didn’t quite gel so I didn’t make any commitment and asked for a copy of the contract to take away with me so I could read it properly.

The peculiar element is that the Terms and Conditions include provision for price variability. Has anyone encountered that before? Specifically: *

‘Where such an increase is accompanied by an increase in the cost price to the Trader of the Purchase Vehicle, the price of the Purchase Vehicle shall be increased by the amount of the new recommended retail price minus the amount of the current recommended retail price (“the price increase”). As well as or instead of such increase in the recommended retail price there may be an increase in the amount of stamp duty or other tax payable in respect of the motor vehicle between the date of this contract and the date of the delivery of the motor vehicle (“the additional duty.”)’

So that means I agree on a purchase price with the dealer and sign a contract, and that price could change by the time the vehicle is available for collection. I told the salesman and his manager that I would not be prepared to sign a contract on that basis and would require that the clause be stricken from the contract. They responded with an assurance that they’ve never increased a price in 21 years and could write “price protected” on the contract to cover this.

Is this a usual condition for a new vehicle purchase? The term “price protected” doesn’t really cut it for me as it does not explicitly include other cost variances such as stamp duty whereas the price being cited today was a “drive-away” price. I’d rather strike the offending clause - in its entirety - from the contract.

The other curious element of the deal is that they don’t know when the car could be available. It could be “1 week, 1 month, 3 months or longer”. I have no problem waiting a couple of months as it’s not an urgent purchase. However, it’s odd that the timeline cannot be definitively established.

If it’s going to be a long wait, I may as well bide my time and wait for a “runout sale”.

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We’ve twice purchased new vehicles that were not stock. One was a Toyota, the other a Subaru. In both instances we were provided with a maximum delivery time for each order, before we completed the contract. It took four days in one instance, before we had a delivery date, and the next day for the other. The dealer either wants the sale or try somewhere else.

Perhaps the dealer considers the T&C usual or normal. That is not evidence it is fair, reasonable or compulsory that you accept either the open ended delivery commitment or price variation risk. Consider your vehicle if ordered on landing in Aus might have a lower landed cost. Will the dealer pass on the saving to you?

I can’t comment on ‘Price Protected’, or if it has any real meaning in respect of a contract to purchase a motor vehicle.

For a straight forward purchase of a motor vehicle if the delivery by date and price are not assured, I’d not sign.

For a $500M project contract neither are assured. But then there will be a team of contract lawyers and document that needs a trolley to sort out any the variations should they arise and fail resolution prior.

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Indeed - not a term I’ve heard but I’m not a lawyer either :slight_smile: As @margotk mentioned - strike the clause out. If the clause appeared in a separate document that was referred by the contract then fair enough, add a clause, but if it is in the contract itself I’d have thought striking it out and all parties initialling it (as one does with every page of a written contract) would be the go …

Well put. It might even be that strange clauses like this exist in many contracts and people just don’t notice, but, I defer to what you said!

I bet the drive-away price was mentioned as today-only, yet they will do it tomorrow or Wednesday or … that and the uncertainty of delivery? Perhaps Sunday is a factor there (can’t get updates) but that would surprise me a little.

Unless this is a terrific deal I think I’d be waiting … I don’t think we’ve seen the peak of sales for this EoFY season by a long shot …

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I’ve just had a look at three different Melbourne based Kia seller’s webites and all have EoFY sales running.

Given that according to the SMH car sales have dropped by 50% during the COVID crisis, I bet if you hunted around you could get a brilliant deal.

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On the question of waiting - if you are no hurry for the vehicle absolutely do it. Time is on your side not the dealers’. It is entirely proper and reasonable to use time pressure in your favour during any negotiation.

Each time I have bought a new car I have conducted a reverse auction. If you have the time to spend I recommend it. Go round the dealers and ask for their best price but tell them they have only one bid. Tell them what you are doing but under no circumstances tell them what the best offer you have so far! If you do that you give away some vital information and information is power. If you tell them that all they will do is try to beat it by a nominal amount. You don’t want that - all it does is waste your time, you want them to sweat out their genuinely best price. Spend a Saturday driving about to save at least several hundred and possibly several thousand dollars.

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Thanks Draughtrider. It’s a standard deal which appears to be RRP when I Google up the price of the vehicle. The dealership has just been acquired by this dealer so perhaps they’re focused on recouping the capital. They had “sale” balloons and bunting prominently displayed around the dealership but when I asked what the “sale” price is, they cited the standard RRP drive-away price and mumbled something about a possible Kia “cash back”: “maybe $1000, maybe $500, not sure”. They’ve been running a local Holden dealership for years; perhaps the uncertainty involved in this transaction relates to their lack of experience with Kia. After I left the dealership this afternoon, I made a few calls to get the ball rolling on shopping around for a better deal (and hopefully one with more clarity!)

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Stamp duty would only increase for two reason, the car price increased or the government increases the stamp duty rate. If the contract was price protected, then the first influence can be ruled out.

The second depends on the effective date of the contract…if it is a formal sale contract, it should be the date it is agreed and/or signed (and executed such as deposit paid). Stamp duty rate on that day would be payable. If the contract was more an offer to buy, expression of interest etc, then the date of stamp duty liability would be at a date when a sale contract is signed. These later forms of agreement can be used when the buyer hasn’t seen the vehicle, but it interested in purchasing once it is physically seen (think of a new vehicle release where one may secure a position in a line to have it delivered).

Another variation could be additional inclusions after contract is signed, such as a buyer asking for tinting to be added. This can be done by standard processes for variations uhder a contract and would affect the final sale price and stamp duty.

I suspect that the agreement you would have signed was a formal sale agreement so the stamp duty would have been on the day of signing (if the clause in question was struck out)…unless there was an agreed variation.

I can also see where such clauses are relevant, where one purchases a new model before it comes out and delivered price is known, and delivery price nominated in the contract is based on current model pricing. The dealer possibly has one contract for all situations as they wouldn’t be experts in preparing individual and specific contracts for each sale.

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Just a bit of information on this matter . Australia , like some European countries , is considering making AEB ( Autonomous Emergency Braking ) Active cruise control and lane assist sensors as a requirement for all new vehicles sold.

Kia for the most part have these safety aids fitted but there is a delay of up to 12 months with some other makes of vehicles that are adapting current models to meet the specs if introduced . It is up to $3000 dollars depending on the model to add the aforementioned items . The dealers are just covering themselves in case it is made law by the Government and required to fit the safety kit to all new vehicles .

I have spoken to some friends in the motor trade recently and the compulsory implementation of these safety features has been put on the back burner due to the Corona Virus .

Basically in a nutshell the dealers are just covering themselves in case fitment of the above safety features becomes law . By the end of 2021 the industry predicts 85-90 % of all new vehicles sold will be fitted with the safety kits anyway.

Regarding your question @margotk has anybody encountered this when ordering a new car . Last year in mid 2019 I ordered a new car . I stipulated I wanted the safety kit fitted . I was told April 2020 would be approximate delivery time . Nearly 1 year wait . The dealer , who is a good friend , showed me the price variation sections of the contract and explained things in much the same way as I have written above …

I think you have nothing to worry about . To the best of my knowledge your Cerato comes with all the safety kit as standard . Enjoy your new car .

.

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Edifying! Thank you.

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That sounds like a great idea but I’ve often wondered if dealers have all our info in their sales network after you visit the first one. So if you go to a dealer, get a price (including the trade-in if there is one) the next dealer will give you exactly the same price/s. Coincidence? Maybe.

There are two components to the price, one being the trade value and the other being the RRP (standard or promotional as set by the importer) of the car you are looking at.

The trade value is defined by sources such as the Redbook. The dealer will elect to put it on their own used car yard if it is a relatively recent model in good nick or wholesale it out. Either way a pristine example will rarely if ever be valued above the top reference amount. Average trades are valued at the low end because (as the pitches go) there are lots of that make and model so hard to resell, or nobody wants that make and model so hard to resell, or …

I traded my near pristine very low km 10 year old car a few months ago and as anticipated it was valued at the top of the Redbook range+value of remaining rego. That was constant across dealers.

The new car offer is an offer while the customer is expected to make a counter-offer. If one enjoys negotiating there are many ways to play, but the dealer can be counted on to start at the RRP and a hard nosed customer a lowball. A customer who does not like the game can do some research and make an offer that is OK for the customer and allows the dealer to make a few extra dollars. Some things that can be to the customers advantage rather than focusing on low price are things like negotiating in bundled services and/or deal accessories where it costs the dealer less to provide than their price, but avoid ‘dealer packs’ (protectorants and so on that are nothing but extra dealer profit products). If one needs finance and the dealer sells that he makes a commission so cash (or having bank finance prearranged) is not king to the dealers profits.

Just the rules of the game :wink:

@syncretic’s reverse auction can work a treat as a negotiating tool so long as there are numerous dealers for the make and model one wants, or one is happy with a range of choices. Not so different from a property sale by set date, conducted as a closed sealed bid auction.

I doubt it. They are in competition with each other directly so I don’t see them sharing such information.

Yes, works best in the big smoke.

Thank you everyone for your insights and advice - I very much appreciate it.

I liaised with another Kia dealer. Their contract was identical but they were happy to strike out the “rubbery price” clause 2 in its entirety, so we sorted out the particulars of the contract and the deal via phone and email, then I went to the dealership last Saturday and signed the contract. We both initialled the amendment. I’m happy with the deal and the transaction. I’ll collect the car this weekend.

I assume all Kia dealers are using the same contract. I pointed out to the 2nd dealer that, as they had the car in stock, I didn’t see any risk to them in removing clause 2; they concurred and were happy to strike it out.

It was a good result. You get a lot of bang for your buck in a low-cost vehicle these days. Now, I’ve just got to pay off the dreaded mortgage so I can aim for a Tesla!

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