Despite risks, car buyers still flocking to parallel importers

Despite risks, car buyers still flocking to parallel importers

With many cars set to be deregistered in the coming months through to 2017 and Certificate of Entitlement (COE) premiums tipped to go down, car buyers are expected to flood the market. But are authorised dealers the only option?

SINGAPORE: Buying a car can be a dream come true, especially when you're offered a good price, but for some, the experience can be a nightmare.

Mr Kelvin Lee claims his parallel importer (PI) delivered his car late, leading to a paper loss of thousands of dollars on his vehicle. The car also came without a head unit, though Mr Lee said he was even promised a newer model for the head unit as compensation for late delivery of the vehicle.

"I was quite frustrated during the collection of the car,” said Mr Lee, an interior designer. “When I made the payments, they had 10 days to install my radio player for me, but they never did. For the next 10 days after I collected my car, they also did not help me. So there were a total of 20 days that they failed to help me install the radio player, which made me very upset about the service by the parallel importer.

“From this experience, I've told myself that if I want to get a car from a parallel importer again, I have to be very careful and write everything in black and white into the sales agreement. This is the basic thing that we need. Because from my experience with this parallel importer, verbal discussions, not written in black and white in the sales agreement, are not considered an agreement."

When contacted, the agent denied the accusations. He said delivery was not late and the car was handed over within the month agreed upon. He added that the missing head unit would have been installed had Mr Lee not arrived early for collection. The agent also said that they had not spoken about an updated head unit model.

Such disputes are common in a business that some have labelled a "cowboy industry".

In December last year, the owners of a parallel importer called Volks Auto allegedly made off with nearly S$4 million after the company shut its doors abruptly. A total of 143 victims were left without cars and their hard-earned savings.

Victims said they were told by the police that the alleged offenders had fled the country. Ten victims banded together to buy cars from another parallel importer, so as to get the best possible deal, with the least risk.

Mr Lo KK was one of them, and he volunteered to be the contact point for their next purchase, which took nearly four months from start to finish. His top priority in selecting a dealer this time around was transparency. Still, the process was "nail-biting".

"I couldn't afford to make the same mistake again, and it's a very costly mistake,” he said. “I would say that the boss of the company is a very helpful person. And he's very responsive to my requests. He would answer us almost immediately. During the process of waiting, there were cars delivered too. As more cars were delivered by the PI, the confidence level grew."

Mr Lo said not all parallel importers run shady businesses.

"You still can get some very honest PIs,” he said. “You just need to do your homework carefully, and always do a back-end check on their records. That's what I would advise future buyers. Do your homework before you enter the market. Do not be attracted entirely by the advertisements that they put up."

KEEPING INFORMED

In the Internet age, word spreads far and fast. Online forums and social media help prospective buyers keep informed, and not just about which companies to avoid.

One Facebook page set up by consumers shares information about delivery dates, payment timelines, hidden costs, and the carbon emission scheme. Moderators and more experienced members pass on tips, and even dealers chip in to help.

"They need to really do more research, and see how long the company has been in the market selling new cars, their track records, the amount of deliveries and the amount of complaints, if they do have,” said Hup Long Automobile Pte Ltd Manager Sean Lim. “Also, buying from a PI, you have to be very careful on your agreements.

“What you should really take note of is, the car that you're buying, what model is it? Is it a new, improved version, or is it pre-facelift version? Second thing you need to look at is COE. Is it a guaranteed package whereby there are no top-ups, and if there are any rebates at all. It has to be clearly stated. And if it's on a bidding package, when will they start the bid? From when to when? And the delivery date. Make sure whatever is promised to you is written down clearly before signing on the dotted line.

"It depends on that individual company, and even its salesperson. If the company wants to survive long in this market, it really has to come up with deals that are beneficial to both parties. That means, if they commit to a certain date, make sure you deliver by a certain date. When it comes to word of mouth, good things spread very fast. It's the same for bad things.”

Buyers are advised do a thorough check on the exterior for scuff marks, scratches and dents after collection. It is also advised to double check important add-ons, such the head unit and leather, match what was agreed upon with the dealer. The vehicle's chassis number should also match the one given at the time of purchase. This prevents buyers from driving away with someone else's car.

JUMP IN PARALLEL IMPORTER CASES

Figures from the Consumers Association of Singapore (CASE) show nine official complaints about parallel importers from consumers in the past decade. The number may seem small, but a closer look prompts further questions.

From January till July in 2015, CASE received two complaints, the highest number since 2005. These mainly involved defective goods or delayed deliveries. However, it also receives miscellaneous feedback and enquiries on PIs, where consumers sought advice or asked for regulations within the industry to be looked at. There were about 200 of such cases altogether over the last 10 years.

"We are always telling consumers that if they want to protect their interests, they should patronise a CaseTrust-accredited business,” said CASE Executive Director Seah Seng Choon. “And by consumer demand, we hope the businesses will be encouraged to join us, because the most powerful incentive for them is that the consumer wants them to be CaseTrust-ed."

Of Singapore's estimated 100-plus parallel importers, 28 are CASETrust-accredited. CASE is working with the Singapore Vehicle Traders Association (SVTA) to get more of them on board. Such businesses have to put up a performance bond of S$50,000.

CASE says the amount in the performance bond has proven sufficient, although it would not be enough in a large-scale scam. It is in talks with the SVTA to raise this to S$100,000, but it acknowledges that this may be difficult, especially for smaller companies.

In the event of a dispute, both parties are encouraged to attend mediation. A successful claim by the consumer can be drawn from the performance bond.This money would be disbursed to consumers who file fair claims with the Motor Industries Disputes Resolution Centre (MIDReC).

If push comes to shove however, filing a lawsuit is also possible. But such cases drain resources and are often drawn out. A buyer may file a claim of up to S$10,000 at the Small Claims Tribunal, but cases must be clear cut.

Another option would be to take the case to the State Court, which now accepts low-value claims and expedites the process.

"Under the new procedure in the State Courts, it is possible actually, to have this expedited procedure and for relief to come to the consumer much earlier than previously under the law,” said Mr Rakesh Kirpalani, a dispute resolution director at Drew & Napier LLC. “I think the expedited procedure also allows for mediation between the parties, and the court I think, would take an active role to encourage the parties to mediate and to negotiate with one another to come to a resolution.

“I think this will see some success, especially since the cost of litigation going to a full trial, if one considers that versus alternative dispute resolution or the expedited procedure, the consumers would tend to save a lot of money."

ENHANCEMENTS ON CONSUMER PROTECTION IN THE WORKS

The Consumer Protection (Fair Trading) Act (CPFTA) took effect in 2004 and is set to be revamped to give it more teeth.

Among the proposed enhancements is the setting up a new Government agency within the Ministry of Trade and Industry to gather evidence and take action against errant retailers, requiring such rogue retailers to inform customers about past injunctions issued against them and pegging the offence to the offending salesperson instead of just the company.

"We're looking at pre-emptive measures,” said Mr Seah. “The businesses, knowing the punishment is going to be more severe, will take the necessary steps not to engage in unfair practices, so that they would not be named.

“So we hope to see this happen, so we don't have to invoke the more severe provisions in the law. Of course, if they engage in it, they would have to face the consequences. So by having a more severe, or stricter law in the CPFTA, we hope the standard of practice in the industry will improve. Certainly, that should happen if they treasure their reputation."

According to the Land Transport Authority, parallel importers registered 3,256 new cars between January and June this year. That's nearly 13 per cent of new cars registered during that period and the biggest proportion since the so-called "golden years" of the parallel import industry, from 2006 to 2009.

In 2008, they accounted for 23.8 per cent of total cars registered.

With COE premiums expected to go down as more vehicles are scrapped, consumers are likely to jump in with parallel importers, who tout cars with better specifications, at more attractive prices.

If sales for the rest of 2015 keep their pace, these importers will be en route to a bumper year.

Source: CNA/ek