New Cars: Delivery Charges (Hansard, 22 April 1996)

§ The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)
My Lords, the 898 Government have no plans to do so. The Government consider that the legislation which regulates car pricing—namely, the Price Marking Order 1991 and the Consumer Protection Act 1987—adequately protects consumers.

§ Lord Strathcarron
My Lords, I thank my noble and learned friend the Minister for his reply. However, is he aware that the average delivery charge of a new car is in the region of £450, in addition to which there is the cost of number plates? Indeed, the delivery charge in particular is a great shock to many motorists who buy a new car. Is my noble and learned friend also aware that certain manufacturers already quote what are known as on the road prices? They include the delivery charge, the number plates, the road tax at £140, and also a full tank of petrol. Does he not consider this to be a much fairer way of presenting new car prices?

§ Lord Fraser of Carmyllie
My Lords, first of all I am aware that the average delivery price is about £450. As regards all-inclusive on the road prices, I can certainly envisage that for a number of would-be purchasers that would be an extremely attractive way to buy a car as they would know exactly what is involved. However, it seems to me a matter of commercial policy for those who are selling cars to note that those who have adopted this approach—there is a number of them now—have done so successfully and therefore to follow their example. I am not persuaded that it is a matter for government to determine how these commercial decisions should be taken. What is important, however, is that the law should ensure that people are not subject to fraud or are misled about what might be included.

§ Lord Peston
My Lords, I do not wish to disagree with that reply. However, I speak as a consumer when I say that I can think of few practices as irritating as that mentioned in the Question, even though one knows it is going to happen. I am perfectly well aware that once one walks into a shop to ask what something costs the price will be marked up. However, has the noble and learned Lord any explanation for what can happen to car buyers, given how annoying it is? Has he any explanation for the fact that many more sellers of cars do not adopt what one would regard as a much more rational and transparent approach? The only practice I know that is as had as the one we are discussing is the selling of computers ex-VAT. That is almost as annoying. However, the matter we are discussing has been getting up my nose for donkey's years. I wonder why the forces of competition do not somehow deal with it more effectively.

§ Lord Fraser of Carmyllie
My Lords, those manufacturers who sell at an all-inclusive on-the-road price will clearly be of interest to the noble Lord.- However, when people buy and sell cars they are often trading in them and it may be the one transaction where there is an element of haggling. Under the price marking order, if there is to be a price for other ancillary goods or services—for which the consumer must pay in order to obtain the principal item—those additional items and 899 their prices have to be stated with equal prominence. I am bound to say there are occasions when I have some doubts whether equal prominence has been achieved. However, I am also aware that a number of major manufacturers have been prosecuted for failing to meet that requirement.

§ Lord Skelmersdale
My Lords, in these days of deregulation why do we need a price marking order at all?

§ Lord Fraser of Carmyllie
My Lords, it is appropriate that there should be such a provision when there are ancillary items. It is important that they should be stated clearly and prominently. It is not a matter of dictating at what levels they should be set, or indeed what should be included, but it seems to me appropriate that they should be clearly stated so that the consumer knows what additional items are involved before he is able to complete the purchase.

§ Lord McIntosh of Haringey
My Lords, I do not wish to detract from the agreement across the Front Benches about the undesirability of government intervention, but surely if the delivery charge is a genuine charge it ought not to he bundled with the cost of the car? The purchaser ought to be given the opportunity of not paying the delivery charge but of collecting the car instead.

§ Lord Fraser of Carmyllie
My Lords, the noble Lord puts forward his particular proposal for haggling on the purchase of his next car. It may be just that sort of arrangement which could be adjusted. That is why I suggest it is appropriate to leave it to the commercial judgment of those who are selling or buying to discuss whether or not they are prepared to have these items included. For some an all-inclusive price may be the most satisfactory way forward. That opportunity is now available from a significant number of major manufacturers.

§ Lord Geddes
My Lords, are motor car manufacturers in any way obliged to justify the level of their delivery charges?

§ Lord Fraser of Carmyllie
No, my Lords. As I said, it is a matter for their commercial judgment. However, I have no doubt that if they continue to raise the level of the charge they will find that people cease to purchase their motor vehicles.

§ Baroness O'Cathain
My Lords, will the Minister confirm that the delivery charges are not calculated by the manufacturers but by the delivery companies?

§ Lord Fraser of Carmyllie
My Lords, I am not entirely sure just exactly how they are arrived at, but they are certainly calculated by those who deliver the cars. What is of irritation to some people is the fact that if one lives in Wick or if one lives just to the north of London one will probably pay exactly the 900 same delivery charge. I can understand why that is irritating to the consumer but, as I indicated, that again seems to me to be a matter upon which individuals can reach a view as to whether or not they are prepared to pay. If they are not prepared to pay for that separate item, they can look for a car which will be sold to them on an all-inclusive basis.

§ Lord Strathcarron
My Lords, is my noble and learned friend aware that the actual delivery charge is approximately £110 per car and nowhere near £450? Is he further aware that the original high charge for delivery was a way of getting round the purchase tax regulations at the time, so no one thought of reducing the charges?

§ Lord Fraser of Carmyllie
My Lords, I am grateful to my noble friend for that historical explanation of how we arrived at these charges. I may have referred to a delivery charge but I should have said that the £450 charge is the average extent of all the other charges that are sometimes added. All I can say to my noble friend—as he will doubtless recall—is that in 1992 the MMC reported on this matter and concluded that the charges were justified; indeed, it recommended no major changes to the United Kingdom car distribution system. I am bound to say to my noble friend that my department is not aware that there is any significant concern about a lack of transparency in car prices.

§ Lord Mowbray and Stourton
My Lords, I do not have a foreign car but I refer to a certain well known German manufacturer which charges something like £495 normal delivery charge in this country. However, if one collects the car I think I am right in saying that the company provides three days' entertainment showing one round its factories, which helps to reduce the burden and gives one a hit of a holiday.

§ Lord Fraser of Carmyllie
My Lords, I can only say to my noble friend that if he is thinking of buying a car in Bavaria he might consider going to Munich in October.