Blog About New Car Servicing and Price Gouging.
The facts about dealer servicing overcharge and your options for change.
The article you are about to read has been compiled from Choice and RACQ research along with the standard advice from the Australian Competition and Consumer Commission into the dealer monopoly on new car servicing and the misinformation you may have been exposed to.
Bought a new car recently? Then you may wonder if you have to get it serviced at an authorised dealership to keep your manufacturer's warranty intact. If so, you're not alone.
According to a Choice survey of 300 back in March 2018 people found:
Just under 50% thought they had to return their car to the dealer to maintain their warranty or were unsure.
Of the 105 people who had bought a new car, 90% serviced their vehicle at the dealer.
But despite what your dealer may say, or the impression you get reading the logbook or warranty terms, you're legally entitled to shop around for the best servicing deal without voiding your manufacturer's warranty (the rules are different for extended warranties), as we explain below.
Are You Being Taken For a Ride - Find out:
- Do I need to service my new car at the dealer?
- Are consumers being encouraged to service their car at the dealer?
- Do I need to use genuine parts?
- Logbooks and dealer stamps
- Capped price servicing
- What about my extended warranty?
- How to keep your car's warranty intact
Do I need to service my car at the dealer?
The Australian Competition and Consumer Commission (ACCC) says "a manufacturer's warranty is a promise to the consumer that the vehicle will be free from defects for a certain period of time". While a manufacturer can have certain requirements in its warranty terms – such as ensuring any servicing is carried out by qualified staff, according to the manufacturer's specification, and that appropriate quality parts are used where required – it can't require you to service your vehicle through an authorised dealer to keep your warranty intact. You are free to make the choice: Pay the dealer premium, or find a garage outside of the dealer network.
"Provided you service the vehicle in accordance with any such requirements, the warranty will remain valid. If the manufacturer's warranty states that the vehicle can only be serviced by an authorised dealer, this may raise concerns under the Competition and Consumer Act," the ACCC has said in written guidance to the automotive industry.
But that message doesn't always seem to be getting across: we've come across examples of dealers flouting the ACCC guidelines and saying you should service your car at an authorised dealer. We also found language in logbooks that strongly implies you'll be voiding the warranty if you don't take it back to the dealer for servicing.
Dealers rely on car servicing to make profit.
Given that car dealers don't make profits on car sales alone according to industry research, it's not surprising that they attempt to lure buyers back after the sale to pay for servicing and expensive "original" parts.
In fact, dealers depend on servicing, parts, car finance and insurance to make their profit margins. A 2016 motor industry report from Deloitte found on average, nearly 30% of car dealer's profits came from servicing, while dealers lost money on new car sales.
One lobby group for some major dealerships explained in a submission to government how their business model works. "By generating sales volumes, dealers create opportunities to build customer relationships which result in a future stream of revenue. Such revenue includes adding and installing aftermarket accessories on the new vehicle sale, dealership finance and insurance, and servicing the customer's vehicle throughout the life of the car."
What the dealers say.
Choice called 24 Toyota, Mazda and Holden dealerships across Australia in April 2018 to get an idea of what consumers are being told about their rights in relation to servicing and warranties. Three dealers gave them completely incorrect advice, saying we had to return the vehicle to a dealer to maintain the warranty. A number of others gave us questionable advice, or only told us we could go to an independent mechanic after being pushed on it.
While most dealers generally said the right thing about warranties and servicing once pushed, many didn't offer this information upfront and resorted to sales tactics to promote dealer servicing, such as capped price service deals and extended warranties, both of which usually lock you into servicing your vehicle at the dealer. Many used terms such as "advisable", "recommended" and "preferred" in relation to dealer servicing, which could further add to the impression that using an independent mechanic may result in problems.
Are genuine parts needed?
Many dealers also angled for dealer servicing by saying genuine parts were either required or highly recommended in order to keep the warranty intact. The problem here is that genuine car parts can be much more expensive than their aftermarket counterparts. In fact, when we looked at this issue back in 2016, we found details of the mark-up being as much as 60% even though the parts are often identical and some from the same source.
What's the law?
But you don't have to pay the price premium on parts to be covered. The ACCC's guidance says that provided you use quality parts, your car manufacturer's warranty won't be voided. If a non-genuine part is used it won't be covered under the manufacturer's warranty, but it would be covered under the warranty of the part's supplier and/or Australian Consumer Law. To be fair, despite the initial response of dealers, when pushed many did clarify that it'd only be the actual part that wouldn't be covered rather than the whole warranty being voided.
Can independent mechanics do software updates?
Another common dealer lock-in tactic was to say that independent service agents won't be able to offer all the software updates that are required. One dealer told us: "Legally you don't have to [bring it back to the dealer] but independents can't update the car which needs to be done pretty much every service". Executive director of the Australian Automobile Aftermarket Association (AAAA) Stuart Charity says independent mechanics generally have enough information available to be able to do a scheduled service. But cars are becoming increasingly computerised and car manufacturers aren't sharing enough information when it comes to repairs and software updates, he says. This is despite car industry bodies signing a voluntary agreement on access to service and repair information in December 2014, which said they would make available to independent repair shops all the necessary information.
This software is available to experienced savvy independent car servicing specialists.
Logbooks and dealer stamps
Choice took a look at a number of logbooks in April 2018 to see what messages were being conveyed to consumers. The upshot? We won't blame you if you've been led to believe you have to take your vehicle back to the dealer for servicing.
A number of brands include a space on the service pages indicating that it should either be stamped and/or signed by an authorised dealer. For example, one Ford logbook we looked at has a space for an "Authorised Ford Dealer Log Book Service Verification Stamp" and also has a checklist asking the mechanic to tick that they are an Authorised Ford Dealer Service Department. Mazda's logbook asks for a dealer validation stamp and Hyundai's asks for a dealer's signature. None of these things are required to keep your warranty intact, but the logbooks certainly make it look that way.
What's the law?
The ACCC has clearly said: "Even if the service page boxes in the logbook are labelled in this way, an independent repairer may sign or stamp the relevant page of the customer's service logbook (once they have completed the service) without it affecting the manufacturer's warranty provided any other requirements are met (i.e. the service is carried about by qualified staff etc.)."
Capped price servicing.
A number of car manufacturers offer capped price service deals when purchasing a new car. Locking in a set servicing price may sound like an appealing offer, but check what you're getting before you sign on the dotted line.
In early 2016, the ACCC took action against Kia over its capped price servicing program. The ACCC said that the car manufacturer had made representations on its website that "the capped price applicable for each service is the maximum you will pay for your scheduled service". All the while, Kia's terms and conditions had allowed scheduled service prices to be amended at any time, and service prices had in fact been changed by Kia four times since 2014.
Choice took a look at a few servicing deals to find out what was going on and found it hard to see the benefit in some cases. The offer of Hyundai's Lifetime Service Plan, for example, is fairly ambiguous. One of Hyundai's explanations says it "allows the reassurance of knowing in advance the maximum cost for each scheduled service". Hyundai specifies the maximum price applicable when you request a service quote online. But these quotes may change without notice and are only valid for an effective period. When we got a quote, it was only valid for 30 days. So we were left wondering what the "Lifetime" in Hyundai's Lifetime Service Plan actually means. Hyundai's terms explain that the entitlement to receive the scheduled service for a price not exceeding the published price "applies for the lifetime of the vehicle".
So what is Hyundai actually offering? When Choice asked Hyundai for more details one of their spokespeople told them that prior to these types of programs being introduced, service costs weren't standardised and they varied markedly across their dealerships in Australia. "Our Lifetime Service Plan fixes that issue, and gives customers a very clear picture of what the prices will be going forward for servicing. Yes, prices may increase slightly due to inflation and that needs to be explained in the T&Cs," the spokesperson says.
Choice spoke to a number of dealers who said cars needed to be serviced at the dealer the whole time in order to keep the extended warranty. The ACCC guidance says that extended warranties usually kick in at the completion of the manufacturer's warranty. "A common requirement of these warranties is that the vehicle must be serviced by the dealer offering the warranty. Imposing this requirement on the owner is permissible," the ACCC says in its guidance.
How to keep your car manufacturer's warranty intact .
- Shop around for the best servicing deal and stick with a trusted mechanic. You don't have to go to an authorised dealer to keep the manufacturer's warranty intact.
- Service your car in line with the schedule and specifications in the owner's manual or warranty logbook.
- Ask that quality parts be used for servicing (the parts don't have to be genuine to keep the warranty intact). Ask for an itemised account for the labour conducted and parts installed. If there's a problem with the parts used, the repairer or part manufacturer will be responsible.
- Ask the mechanic to fill in your logbook – they don't need an authorised dealer stamp for the warranty to be valid.
- If you're choosing not to service your car through the dealership, ensure your service centre is reputable. NSW and WA have repairers' licensing schemes, and elsewhere, you can check to see if they're a member of the Victorian Automobile Chamber of Commerce (VACC, in Victoria) or the Motor Traders Association in the other states.
Car makers gouge drivers on repair costs: ACCC.
Last updated: 10 August 2017
Car makers are protecting inflated servicing costs by engaging in conduct that limits industry competition, a draft report from the ACCC has revealed.
The Australian Competition and Consumer Commission's (ACCC) yearlong investigation into the new car market has found manufacturers charge an average mark-up of 64% on new car repair and servicing, and that car makers withhold information from independent mechanics in a move that ensures the margins remain thick.
Car dealers made an estimated $64 billion in the most recent financial year, with the repair and servicing sectors found to be worth $24.8 billion.
"Manufacturers and authorised dealers generally earn higher profit margins from the sale of parts and servicing than from new car sales," says Rod Sims, chair of the ACCC. "This provides an incentive to limit competition for the repair and servicing of new cars."
Estimated profit margins for car dealers in Australia
- Service -- 64%
- Parts -- 21%
- Used vehicles -- 10%
- New vehicles -- 7%
Car makers were found to maintain these inflated prices by withholding valuable information from independent mechanics, conduct that ultimately limits competition in the industry.
Car makers are not providing independent mechanics with the technical information needed to service new cars, or delaying the transmission of that information, despite the industry in 2014 voluntarily committing to share the same information as they do with their authorised dealers.
"This lack of competition hurts new car buyers who have fewer options to get the best deal for repairs and servicing, and restricts independent repairers from competing on a level playing field," says Sims.
"For new cars to be properly repaired and serviced, independent repairers need access to electronic information and data produced by car manufacturers."
The competition watchdog is recommending it be mandatory for car makers to share this information with independent repairers, in the hope it will increase competition and lead to lower repair and servicing costs for consumers.
The ACCC draft report also found the car industry relies on a dominant "culture of repair" for dealing with car defects and failures, and that it has established rigid complaints handling systems and policies in an effort to prevent new car owners from receiving a refund or a replacement.
Other issues of concern that were identified include the widespread signing of non-disclosure agreements to secure a repair, and the publishing of inaccurate fuel performance figures.
More than 10,000 complaints about car manufacturers were made to the ACCC in the last two years, while motor vehicles account for approximately 20% of all complaints dealing with consumer guarantees.
You have a choice in escaping dealer price gouging:
Steve is the manager of Highway Auto Rockhampton
An automotive engineering and repair business established in Rockhampton some 52 years back. This firm pioneered computerised diagnostics when the first computerised car came to Rocky.
This business is fully resourced to take care of your new car servicing. They have access to electronic data and diagnostic resources necessary in servicing the modern automobile. Steve tells us he will carry out new car servicing at a fraction of what the Rockhampton dealers are charging. He also offers a lifetime workmanship guarantee*.
A page about car servicing details with prices.
Vehicle health check report included.
Ditch the dealer Logbook Scheduled Servicing.
Premium brand batteries for computerised vehicles.
Details of Highway Auto's Lifetime Workmanship Guarantee*.