The truth about new car price increases, with a contract already signed

What should you do if the dealer says your new car will cost thousands more, but can’t promise when it will be delivered? Of course, you already signed a contract. Now what…?

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You've been waiting endlessly for months and months for the car of your dreams; life's not perfect. The dealer rings you on the day before delivery saying it’s going to be $3000 extra.

What do you do?

Ordering a new car right now might mean it gets delivered sometime in the next 12 to 18 months - just in case you weren’t aware of the current car stock shortage problems. It's unprecedented, as they say in the mainstream media.

And plenty of new car buyers already risk making these 10 mistakes in 2022.

This email arrived from an audience named Luke Maslin, which I think pertains to many  people out there with their patients wearing wafer-thin while waiting for their new car to arrive, having paid their deposit geological-time ago.

Mr Maslin says:

I ordered a Toyota Kluger through AutoExpert in October and I was given six months as the

probable delivery date. As that time is fast approaching I would value your thoughts on the following, which happened to a friend of mine today:

He ordered a Nissan Patrol.

Sorry to hear that, although the Patrol is one of the two Nissans that I would recommend buying because it is very good value compared with the LandCruiser, facing indefinite production delays.

He ordered that back in April of 2021, and was told it should arrive in November, 2022. I think it was delayed, and a fortnight ago he was informed the car would be delivered today (the 28th of February, 2022), this morning.

The dealer called to say Nissan had raised their prices and he would need to sign a new contract.

Bastards.

…And pay an additional $3000.

An additional three grand is outrageous - ‘sign the papers or suffer, old man’, is what I’m hearing.

He paid up. He didn't feel as if he had much choice. Waiting until the day to sting him for an extra $3K appears unethical.

Surely this price had been known about for some time over the past 10 months.

Absolutely. I can only imagine how he felt; perhaps experiencing Stockholm syndrome and just loved the dealer for finally getting him his car. We'll never know.

Well, certainly for the past couple of months. I'd suggest.

This seems more like a ransom given the decision was sprung on my friend at the last moment. 

I don't want a last minute price rise happening to me. If there is to be a price rise in my car, at what point should the dealer let me know?

I think it would be reasonable if they inform you as soon as any price rise is decided, Luke.

I had the option to cancel the contract and go car shopping elsewhere.

Yeah, but the problem with that is you go back to the end of the queue and you get to wait another 12 to 18 months for your car.

Is there anything illegal about what happened in my friend's case on the last day?

I'm wondering if there is a cutoff point closer to the delivery date after which the dealer cannot raise the price of the car. I would be most grateful for your thoughts.

I don't think there’s anything illegal here. But let’s do some basic commerce here.

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LISTEN TO THE MONEYTALK

Commerce says that you offer a price and they agree to it. Then you sign a contract and the deal is done. Then there are terms and conditions, like clauses. One of the clauses in the contract is a so-called ‘subject to list price increase’ clause.

That means if there is a long wait, and then the importer puts up the price of the vehicle, and the dealer has to pay this elevated wholesale price for that vehicle, then the dealer gets to pass that on to you.

Unfortunately, typically, you decline saying  ‘I’m not paying that.’ Then the deal falls over and presumably you get your deposit back.

But it really does depend on the terms and conditions of the contract - which is precisely why you should read that entire contract - and also, this is why you should pass it by your solicitor if you don't understand any of it.

Particularly in the current market now, maybe it's going to cost you $300-400 for your solicitor to take the time to read that contract and red flag any issues for you. But it's probably worth it if you've got a couple of grand in the dealer’s bank account. That's a value judgement that you have to make.

My investigation, which involved going to redbook.com.au - which is a great historical  reference guide to the list price of vehicles - shows me that in December of 2021, so just three months ago, Nissan did have a price increase for the list price of Patrol.

But according to my research, the base model ‘Ti’ went up from $81,160 by $1000, to $82,160. The top-spec ‘Ti-L’ went up from $94,115 to $95,115. It’s unclear where this $3000 list price increase came from.

View fullsize

*Does not include statutory/on-road costs.

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Patrol pricing since 2019: Up.

I'd also suggest that $1000 rise is also subject to things like stamp duty and Luxury Car Tax. They would be proportional increases.

You’re probably not going to be told why the increase was so high. That's probably outside the terms of the contract, subject to the accuracy of RedBook’s figures.

I’d suggest that it does seem to be a breach of the contract to me, but I haven't seen the friend’s particular contract. 

WHEN DEMAND EXCEEDS SUPPLY, WEIRD THINGS HAPPEN

Basically, this is just one of those things that we all have to roll with because carmakers, dealers, importers behave like this in general. You order a car today, they can't tell you, generally, when it's gonna be built. They can try to get some sense of it from the wholesaler/importer, but ultimately they really don't know in a great many cases.

So, my strong advice to you is just wait. I know this is counterproductive to my underlying business here, getting new cars cheap, ‘just click the link’ and so on.

But the best thing you can do in this market, when they don't know when the car is going to be built, and in many cases can't even tell you the damn price, which is one of the most critical aspects to any commercial transaction - waiting is a strong option if available to you.

If a property developer can't tell you when your new office is going to be built and can't tell you how much it's going to cost, would you sign a contract to buy it? Sure, I guess some people would, but you probably shouldn’t. 

Obviously, everybody has different needs when it comes to cars; some have too much money, maybe your novated lease is up. Some people can afford to wait and some people need a car immediately because you got crashed into. It's been so wet on Australia’s eastern seaboard for months, so there's probably a lot of write-off crashes at the moment.

A replacement car can be problematic right now, especially if you’re living anywhere in south-east Queensland or North-east NSW. If that's you, you probably can’t wait. If you're one of those people, my advice to you is be as flexible as possible. Be flexible on the make, model, variant, colour, powertrain, features - because the more flexible you are - the more likely it is that we'll be able to find you a car quickly.

On the other hand, if you've got this vague idea of upgrading because you want a new car but you don't need one, then just wait and I suspect this situation will hopefully start to ease over the next 12 months. That's that's the sense of what I get from talking to industry insiders. 

But queuing up to buy a car in an environment where they don't know delivery times, where demand exceeds supply and they can't tell you the price or the ballpark delivery date, this is just a living consumer hell that you don't need to be in.

HOW TO MINIMISE THE PAIN OF A NEW CAR SHORTAGE

However, I would encourage anybody to verify the magnitude of the list price increase before signing any other contract. Remember that little clause. They don't get to randomly just pump up the price because they feel like it - they get to pump up the price according to a list price increase from the manufacturer. 

You should always verify and cross-reference the list price increase, and you should try to acknowledge that the increase could be subject to stamp duty and Luxury Car Tax if the car is worth more than the threshold (which you can check on the ATO website.)

Also, remember that dealers and manufacturers have an investment in the relationship that they have with you, at least the good brands do. So in this situation of a list price increase, there should be some negotiable aspect to that.

It should be based on the value of your relationship with the carmaker, because you're in this for the next few years and remember: you're going to pay for servicing and parts and tell all your friends and family how much you love your new car. You’re also going to tell them how you get treated post-sale.

Then, at the end of this vehicle’s ownership, you might get another of their vehicles - or you might hold a grudge and go with a different manufacturer. Pointing this out to the dealer, that you are prepared to shop around for servicing and your elderly mother’s new car in six months time, might be a good tactic to use.

This is price-gouging type behaviour is the textbook way to leave a bad taste in a consumer's mouth from the outset. Not to mention, you've already been patient and waited for more than six months to take delivery of this very expensive car.

And remember too, it's not really that special of a car, it's actually just an appliance when you're buying mainstream, large volume cars of this nature. There's nothing really that special about a Patrol or a Kluger or even a Mercedes.

They are tools to do a job, whatever that is, be it recreationally or just logistically.

So this ongoing relationship with you is theirs to lose. Carmakers and dealers need to meet you halfway and take some of the sting out of a sudden price rise, or sweeten the deal in some meaningful way.

Telling customers ‘our hands are tied but we'll cop some of this on the chin because we're in it with you’, at the moment, the conversation with a dealer changes for the betterment of everyone.

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