Save up to $15,000 on a 'new' car

Demo or 'near-new' cars selling at large discounts to new car prices

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 5, 2012 11:25 am AEDT

Shopping for a new car? Try looking for demo on near-new models – you could save up to $15,000. Up to 16,000 vehicles are being counted as new car sales, despite being later sold as used or demo models with more than a third having travelled less than 50kms.

According to the Australian Financial Review (AFR), the majority of the cars are being sold as near-new or demonstrator models, with discounts of up to $15,000 on new car prices, but are being included in new car sales figures. Manufacturers and importers pre-register cars to meet their production forecasts and collect on bonuses, while dealers pre-register, so it looks like they are selling stock, but instead are cashing in on volume bonuses from the manufacturers, while selling the cars as demo models.

A search of online classified site Carsales.com (ASX: CRZ) by the AFR, has shown that 16,691 cars are listed in the near-new or demo category, with 6,200 of them having travelled less than 50km. The newspaper also stated that there were 2010 and 2011 models that have travelled less than 5kms, selling as used cars. The implication being that these cars had been sitting in dealers yards for some time, despite being recorded as new car sales.

Related: Car prices set to fall

The report suggests that the car market in Australia needs more transparency in its operations and could be heading for a shake-up. The very skinny profit margins for listed car dealerships like Automotive Holdings Group (ASX: AHE) and AP Eagers (ASX: APE) suggest that in a tough sector, participants are struggling to make a profit. For used car dealers, business appears even tougher, with new cars released straight into the used car market at discounted prices, if the report is correct. And its not just the dealers, but car part manufacturers that are struggling. Last week Autodom Limited (ASX: AIE) shut down its plants in Melbourne and Adelaide, and collapsed into administration.

Foolish takeaway

The proliferation of car makes in Australia, with 64 brands competing here currently, and the expected arrival of more from China suggests things aren't going to get better any time soon. The car industry certainly doesn't appear too healthy at the moment – despite the record numbers of new car sales being recorded, or as some believe – jacked up.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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