Import savings nil, but big risks when buying offshore

UPDATED: 16/02/2016PARALLEL near-new imported cars make little financial sense and will only appeal to enthusiasts wanting a vehicle rare to Australia, according to data collated by GoAutoNews Premium.

GoAutoNews Premium also found that, despite the uproar, dealers will not be affected by the sudden – and unexpected – announcement this week that the federal government would allow the private importation of a restricted number of near-new cars.

It just does not make financial sense and contains massive risks in terms of ownership and factory support of what will be an orphan car.

Even specialist vehicle importers say the move will not make major changes to their business.

The reason for cold water being thrown on the idea is cost.

GoAutoNews Premium finds that although the change means private buyers can buy a car apparently cheaper in a right-hand drive market such as the United Kingdom, Japan or South Africa, the price difference after currency rate adjustments, transportation and importation costs and taxes are minimal – and in fact far more – than buying the car in Australia with full warranty and parts back-up.

These imported cars do not escape luxury car tax or customs duty, must carry the cost of shipping, need a list of certifications and quarantine examinations, and still need registering for Australian roads.

The body blow will be no warranty on the vehicle because the warranty coverage on the car in its home country does not apply in Australia.

Add in a massively reduced resale value for an orphan car, the need to source specialist parts from the country of origin if they are dissimilar to an existing car model sold in Australia or are for a model not even sold in Australia.

Not to mention a reluctance for insurance companies to take on these cars and that will result in a considerably higher insurance premium.

The head of Motor Trade Association of Western Australia, Stephen Moir, described the announcement by the government as a “complete Furphy”.

“This has been introduced with no consultation with the industry, and with no thought at all about the consumer’s rights,” he said.

“It’s a populist policy that does nothing. There’s no tax reform of the redundant Luxury Car Tax and despite the announcement, no compliance reduction to the dealers.”

The press release from the minister for territories, local government and major projects Paul Fletcher said the change in policy, effective in 2018, would give “more choice for car buyers and less red tape for car industry”.

It said there would be a $70 million saving from “less compliance”.

“Nowhere does it say on the release about how or where this saving will take place,” Mr Moir said.

The minister’s press release said there would be an $18 million-a-year saving because “under the new law there will no longer be a requirement to physically affix an identification plate to vehicles.’’Australia’s biggest vehicle retailer, AHG Ltd, said that “given the costs of importation, industry estimates suggest it would be uneconomical to undertake private importation of the vast majority of vehicles in the in the volume brands category”.

“Many of these are already cheaper in Australia than the UK or Japan,” it said.

“The government notes that most vehicle warranties only apply in the country where the vehicle was purchased.

“It also notes that ‘under current arrangements, vehicles that have not initially been sold into the Australian market by vehicle manufacturers via a dealership will likely remain outside of any manufacturer safety recall”.

For consumers, GoAutoNews Premium found that for a car valued at $30,000 in the UK, buyers must add about $9200 to cover shipping costs and Australian government charges, and then add registration and on-road costs.

But the VAT (goods and services tax) can be refunded and that means a 20 per cent deduction on the new-car price. In the case of the Lamborghini (below), it isn’t cost-effective but it does make the Porsche 911 cheaper on paper.

If a $30,000 car was sourced from Japan, the extra costs – less registration and on-road fees – would be about $8500. Tax is applied to a new car in Japan only on registration, meaning it is not applied to exports.

Import specialist Cargo Online Australia is a global shipping group with a strong trade in moving vehicles.

Its customs broker, Greg Selsby, said he had calculated the cost of importing a Toyota 86 from Japan according to the proposed rules and he discovered the price of the sportscar in Australia was cheaper.

“It (the new regulation) is for a small group of people who are looking for very specific vehicles,” he said.

EXAMPLES:Lamborghini Aventador LP700-4 coupe
Price in the UK: 294,700 (equivalent to $A604,357 @ 0.49p/$1)
Price in Australia: $771,500 (on-road
ADD:
Duty (5%): $30,218 ($634,575)
GST (10%): $63,457 ($698,032)
LCT: $209,500 ($907,532)
Costs, freight, insurance: $5000
Customs costs: $3000
On road costs: $10,000 ($925,532)
Less VAT refund: $100,017
= $54,015 extra cost to importHonda S660 convertible
Price in Japan: ¥1,980,000 (equivalent to $24,783 @ Y79.89/$1)
Price in Australia: n/a
ADD:
Duty (5%): $1239 ($26,022)
GST (10%): $2602 ($28,624)
LCT: n/a ($28,624)
Costs, freight, insurance: $2500
Customs costs: $1500
On road costs: $5000 ($37,624)
= $37,624 for a car unique to AustraliaLexus LX570 SUV
Price in Japan: ¥11,000,000 (equivalent to $A137,683 @ Y79.89/$1)
Price in Australia: $150,500 (on-road)
ADD:
Duty (5%): $6884 ($144,567)
GST (10%): $14,457 ($159,024)
LCT: $31,627 ($190,651)
Costs, freight, insurance: $5000
Customs costs: $3000
On road costs: $10,000 ($208,651)
= $58,151 extra cost to importPorsche 911 S coupe
Price in the UK: 85,857 (equivalent to $A176,050 @ 0.49p/$1)
Price in Australia: $254,800 (on-road)
ADD:
Duty (5%): $8803 ($184,853)
GST (10%): $18,485 ($203,338)
LCT: $46,251 ($249,589)
Costs, freight, insurance: $5000
Customs costs: $3000
On road costs: $10,000 ($267,589)
Less VAT refund: $29,140
= $16,351 cheaper to import* LCT applied at 33% above the $63,184 threshold
** Customs costs are inflated to allow for possible quarantine costs
*** On-road costs are approximate