In its submission to the Consumer Affairs Advisory Council’s inquiry into .. the Automobile Association has provided detailed information about the cost of motor vehicle repairs – and there are worrying trends. Repairs have risen much faster than inflation, while new car prices have risen much more slowly.
As reported by CFA in July, the Commonwealth Consumer Affairs Advisory Council is currently looking at this issue. An issues paper was published in July and CCAAC is now considering submissions (available on the Treasury site here).
In a media release covering their submission to the CCAAC inquiry, the AAA state:
Over the past ten years average vehicle service and repair costs have more than doubled. However, over the same period, the cumulative increase in overall consumer prices has been just 32 per cent.
We know that many new vehicle dealerships rely on strong profitability from vehicle servicing and sales of spare parts to underwrite other elements of their business.
We have real concerns that with rapid advances in vehicle technology and complexity, the level of competition for vehicle servicing and repair is being restricted.
Whether consciously or not the car industry (dealers and manufacturers/spare parts suppliers) seem to be creating repeat business out of something consumers think of as a one off transaction.
Are they also exploiting consumers’ behavioral bias: we care much more about a low upfront price than about on the costs we will bear later in the life of a product for spares and repairs – think about computer printers which are cheap, sometimes given away: the industry makes its money through sale of expensive ink cartridges every few months.
ABC Radio National’s National Interest featured the issue on Sunday 14 November. The piece includes interviews with Peter BradleyManager, Southeast Motor Company, Naracoorte and Andrew McKellar, Executive Director, Australian Automobile Association. Here’s the blurb but the interviews are worth a listen.
If you’ve bought a new car in the past 10-or-so years, this won’t come as a shock: you’re driving a computer on wheels. That’s right: cars are now so advanced that highly specialised equipment is needed to maintain and fix them. What’s more, the spanner-wielding grease-monkeys at your local garage are rapidly being replaced by technicians in smart-casual lab suits who can plug your car into diagnostic equipment and wait for the verdict—in some cases coming through from from Germany or Japan. These advances put authorised dealers and their workshops in pole-position in the lucrative repairs market—which unlike the car sales side of the business, actually has high profit margins. The question is: do authorised repairers have an unfair advantage? Are car manufacturers withholding information from independent repairers and slamming the door on their business? The federal Treasury is looking into this very issue and accusations are flying thick and fast. So, has the time come to free up the flow of information for car repairs in Australia?
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