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Office of Fair Trading to investigate fleet deals

Large-scale discounts to fleet customers have been heavily criticised in the newly-published Government report on the UK car industry. It claims private buyers are getting a poor deal because of the generous discounts enjoyed by corporate customers.

It also slates the standard of service and repairs provided to customers and conditions imposed on garages seeking authorised repairer status.

The eighth report by the Trade and Industry Select Committee into the UK car industry published today, concludes that changes to selling regulations has had little impact on the market.

The report states: "Despite changes to the block exemption agreement, we are not convinced that consumers in the UK are getting a good deal in purchasing new cars or in servicing. It seems clear that there is still scope for individual consumers to pay less for their cars. If the discounts offered to fleet purchasers were not as large, the margins with which dealers could trade with individual customers would not be as slim.

"We can see no reason why the discounts offered to fleet purchasers should be greater than those offered to any other bulk buyer such as a large retailer. There has been consolidation in the car retailing market. If bulk purchases by dealers were discounted in a similar way to fleet purchases of a similar size, consumers might benefit from this consolidation. At the moment that does not appear to be the case."

The committee has asked the Office of Fair Trading to investigate the discounts offered to fleets. It has confirmed it will consider the select committee's findings in relation to the Competition Act.

On the subject of aftersales, the committee believes consumers are paying too much for car repair and servicing, where competition is being constrained and minimum standards are lacking.

The reports says that, while vehicle manufacturers can now give independent garages 'authorised repairer' status, the criteria set by the manufacturers to achieve this status vary widely, with some manufacturers effectively requiring investment of tens of thousands of pounds.

"Others have set significantly easier criteria. This would seem to indicate that the level of investment required by those that have set them higher is a barrier to entry rather than a genuine requirement for being able to service their vehicle properly.

"We fail to see, for instance, how specifying the type of carpet tiles required in the reception areas can have any impact on the quality of servicing and repair that a garage offers," the committee concluded, stating that the conditions imposed on those wishing to become authorised repairers are "anti-competitive". The Office of Fair Trading has also been asked to investigate these practices.

RMI reaction

'Private car buyers and car dealers have been cross-subsidising both daily rental and large fleet buyers for many years, so we are delighted that the Trade and Industry Select committee has highlighted once again the big difference between car prices available to fleet customers, compared with the retail buyer,' says Alan Pulham, franchised dealer director for the Retail Motor Industry Federation (RMI).

SMMT reaction

In the last five years new car prices have fallen by an average 9.2%. The committee concludes that further price reductions could be made if bulk purchases offered to large retailers were discounted in a similar way to those of fleet purchasers. However, the SMMT says, this is already reflected in the Supply of New Cars Order 2000 which requires manufacturers to offer exactly these 'equivalent discounts' to bulk buyers.

The SMMT rejects the claim that restrictive practices are used to prevent entry to the service and repair market. Over the last year the industry has moved decisively to open up the market for independent service and repair centres. In May 2004 the OFT gave manufacturers a clean bill of health after all car makers removed franchised dealer servicing as a condition of new car warranties, the society said in a statement.

"It is accepted that investment criteria for 'authorised repairer' status may vary across brands. However, while core criteria are used to guarantee minimum standards of safety and staff competence, it is not unreasonable for the investment made in premium brands to be reflected in additional customer service requirements," the statement continued.

  • The full report can be viewed here.
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