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Off with the on-the-road fee, says Credit Regulator

If you didn’t know what an on-the-road fee was six weeks ago, chances are you have some idea now. 

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It’s that fee which dealerships across the country routinely add to car deals, whether the buyer is paying cash or financing the purchase.

And it’s not a small amount - usually between R4000 and R5000 on cars with a purchase price of under R200 000! More for the higher end cars. 

The National Credit Regulator is going after not the dealerships, but their bank partners which finance those deals, saying they have no legal right to add that fee to their contracts.

That’s because the Regulator doesn’t have a mandate to “police” the motor dealerships - only the credit providers. 

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So the banks which finance these car deals are the credit providers, or, in the case of  BMW Finance and VW Finance, the finance arms of the motor manufactures.

It’s those two which the Regular issued compliance notices to last month, one after the other, but it won’t end there - the car finance divisions of the major banks will be getting their compliance notices soon.

In a nutshell, the Regulator says the National Credit Act does not allow for the charging of an on-the-road fee.

The credit providers can and do charge an initiation fee. They can add an extended warranty, the cost of delivery, if the buyer doesn’t collect the car themselves - plus  a tank of fuel and licence or registration fees.

But they can’t pad those costs.

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As for what the on-the-road fee covers, in almost all cases, the dealership doesn’t routinely elaborate - the fee just lands up on the contract without a break-down. And those who query it are usually told something like “it’s a standard fee to cover the preparation of the vehicle for sale”.

And if you push for a break-down, you’re told things like a pre-delivery check, valet, fuelling and even gifts for the new owner, such as flowers, champagne and a giant bow around the new set of wheels.

One dealership once memorably listed a percentage of his monthly operating costs - rental, staff, even the car washer and security guard.

All valid operating costs, of course, but they should be incorporated into the advertised price of a car, not added on the back end of a contract. That’s the transparent way to price a product.

When confronted, the dealership will invariably say that the fee was disclosed at the time of the sale and the buyer consented to it and put their signature to the contract, knowing that there’s no way anyone can prove that there was no verbal disclosure.

So of course the aspect of these compliance notices which has got consumers very excited is the Regulator has ordered those two credit providers to do an audit and refund that on-the-road fee to every consumer which was charged it, and bear in mind that the Credit Act has been in force for 10 years..!

Given that the on-the-road fee generally ranges between R3000 and R7000 - that’s a lot of money. 

So naturally, I’m hearing from a lot of car buyers, wanting to know how they get their on-the-road fee refund.

Here’s what you need to know for now:

-None of this applies to cash deals. The on-the-road fee may not be included in a credit agreement - that’s what the Reguator’s issuing of compliance notices is about.

-So far only BMW Finance and VW Finance have been handed compliance notices and told to refund those who had the fee added to their finance  agreement. And they are appealing the move anyway, so this is going to drag out.

-If your car was financed by any other bank or credit provider, this doesn't apply to you. Yet - the Regulator is far from done on this issue.

So if the fee was added to your credit agreement, with whatever bank, the Credit Regulator wants to hear from you - email [email protected] Remember to attach your credit agreement as evidence.

For me, the biggest thing to come of this is far more people now know what an on-the-road fee is and that it can’t be added to credit agreement. 

To my mind it shouldn’t be charged at all, no matter whether the car is financed or paid for in cash. 

So if you’re in the process of buying a car, and you see it added to an offer-to-purchase document, question it, and refuse to pay for anything extra (beside the actual car’s extras) beyond licensing and registration and a fee to cover the dealership arranging that for you and a tank of fuel.

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