Car industry outrage over dealers jacking up demo prices by $10K in wake of new car shortage

Opportunistic price gouging by new car dealers has been branded as “appalling” and “despicable” by the head of Australia’s peak automotive industry.

Opportunistic price gouging by new car dealers could trigger changes to the way cars are sold, according to the nation’s peak automotive body.

Many car dealers are advertising near-new vehicles as low-mileage demonstrator models for significantly more than recommended retail prices, adding $10,000 in some cases to the bill for cars in stock.

Federal Chamber of Automotive Industries chief executive Tony Weber said demonstrator vehicle prices in many showrooms represented “appalling behaviour”.

“I think it’s despicable behaviour to price gouge people when there is a supply constraint as there is at the moment,” he said.

“It’s opportunism and it’s something that is just not appropriate.”

Tony Weber, chief executive of the federal Chamber of Automotive Industries. Picture: Supplied

Dealers are charging up to $92,468 drive-away for Ford Ranger models that should cost $73,281 drive-away. Some Toyota dealers are asking RAV4 hybrid customers to pay an extra $20,000 for cars in stock, while Subaru, Kia and Volkswagen dealerships are adding more than $10,000 to the bill for sought-after models.

General manager for vehicle valuation service Redbook.com.au, Ross Booth, said strong demand and limited supply of new cars had flipped conventional prices upside down.

Mr Booth said demonstrator vehicles with a few hundred kilometres on the clock were usually worth less than a brand new machine, but significant new car production delays have allowed dealers to charge a premium for cars in stock.

Mr Weber said dealer profiteering could changes to the way cars are sold, as more brands embrace non-conventional sales models.

An increasing number of manufacturers including Honda, Mercedes-Benz, Tesla and Polestar have adopted direct-to-customer sales structures that allow customers to buy vehicles at a fixed price without dealer mark-up.

“This supports examination of different business models to eliminate this sort of behaviour by dealers,” he said.

“It’s very hard for consumers, they want the product but that doesn’t mean they should be taken advantage of.”

Australian Automotive Dealer Association chief executive James Voortman defended sales staff, saying the situation was the result of a shortfall in vehicle supply “completely beyond the control of Australian dealers”.

James Voortman, CEO of the Australian Automotive Dealers Association. Picture: Jamila Toderas

“There is strong demand for new cars but very low supply,” Mr Voortman said.

“Customers are being made to wait months and in some cases more than a year for some new popular makes and models.

“Being able to purchase a popular model vehicle which is near new without the need to wait is commanding a premium … buyers are placing significant value on the ability to avoid waiting for near new cars which is also seeing demonstrator models fetch higher prices than they would normally.”

James Whitbourn, founder of new vehicle brokerage service Car Helper, said high prices advertised by dealers “are not necessarily greed”.

“The bottom lines of businesses are impacted by the supply constraints,” he said.

“The stock allocation is substantially reduced compared with normal times, so it follows that each car needs to generate a higher profit margin.”

Mr Whitbourn said car price “craziness” was compounded by opportunistic online advertising.

“People jump onto Carsales and find the maximum their model is listed for, then put their car up for a little bit more,” he said.

“But time on the market is blowing out – used cars are just sitting there with these silly numbers on them.

“People aren’t buying like they were six months ago.”