Commerce Commission cautions car dealers
Issued 16 January 2003-04/086
Commerce Commission cautions car dealers: Interest-free deals must be just that
The Commerce Commission is cautioning car dealers that interest-free deals that are not truly interest-free risk breaching the Fair Trading Act, an offence which can attract fines of up to $200,000.
Director of Fair Trading Deborah Battell said that if an offer is advertised as being interest-free, then there must be no extra cost to the customer built into the price.
The caution follows a recent settlement between the Commission and Christchurch-based car dealer, Laurie Payne Motors Limited, in relation to what the Commission believed to be misleading advertising of interest-free prices.
The company's website promoted a number of vehicles available for sale at prices described as '36 months, 0% interest free, conditions apply'. If a customer chose to pay cash rather than enter into an interest free deal, however, the cars were offered for sale at reduced prices.
"A 1994 Mazda Lantis Sedan, for example, was available under the interest-free deal for $9,995, but a cash buyer would only have to pay $8,200 for the same car," said Ms Battell.
Ms Battell said that it was now well established through a number of cases taken by the Commission that to offer a product at a particular price on an 'interest-free' basis but at a lower price for cash was a breach of the Fair Trading Act.
"The price difference is effectively the cost of the interest," she said.
An additional concern was a $300 booking fee which applied but was not disclosed in the website advertising.
"Price is a fundamental element of competition and is an important basis of most consumer purchasing decisions. People need to be able to rely on pricing information provided by companies in order to make informed choices, and the Commission will not hesitate in taking action against car dealers who persist with these misleading offers," Ms Battell added.