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Wednesday, June 22, 2011

Car sales impacted by amended Hire-Purchase Act

The Star Business, Wednesday, June 22, 2011


SOURCE:

Wednesday June 22, 2011

Car sales impacted by amended Hire-Purchase Act

By THOMAS HUONG and EUGENE MAHALINGAM
starbiz@thestar.com.my 

PETALING JAYA: Worried about the possibility of trickling cashflow, a rise in booking cancellations and longer leadtime for completion of sales, many stakeholders in the automotive sector say the recent amendments to the Hire-Purchase Act 1967 (HPA) will hurt the car retail trade. Already, there are complaints of a slowdown in sales.

While some car marque franchise holders and dealers said they were supportive of the amendments, which aim to protect vehicle buyers from losing their booking fees and deposits paid to unscrupulous sales advisors and car dealers, among other benefits, many automotive stakeholders have described the amended Act as “confusing” and “troublesome.”

One car dealership's general manager said the situation was “unbelievable” and the amended Act overly protected consumers to the detriment of car retailers.

The Proton Edar Dealers Association Malaysia (PEDA) and Federation of Motor and Credit Companies Association of Malaysia have urged the Government to defer and review the amendments to the Act.
Ready to roll: A new car undergoing inspection before rolling out. The recent amendments to the Hire-Purchase Act may result in car buyers placing ‘phantom bookings.’
 
PEDA president Armin Baniaz Pahamin claimed that Proton car sales had dropped by 50% since last week. Another car dealership's general manager claimed that the sales of a Japanese car marque had also dipped significantly.

“Normally, the Japanese principal allocates between 150 and 200 cars to its dealers each week. In the last few days, the allocation dropped to only 10 cars. This is because until we have firm orders (meaning booking fees), we will not order the cars from the principal,” he claimed.
Under the amendments, effective June 15, all used vehicles for sale will undergo Puspakom's 18-point inspection to ensure their roadworthiness.

Another issue of contention was the 1% maximum booking fee (based on the total selling price) mandated by the amended Act, which requires car sellers to refund customers 90% of the booking fee if the deal falls through.

Armin pointed out that unlike in the past, presently car sellers or dealers could not accept booking fees before the car buyer was served with a Second Schedule notice.

“The Second Schedule notice can only be completed and served, in practise, usually after the hire purchase loan application is approved.,” he said yesterday. The remaining 9% downpayment on the car can only be paid when the hire purchase agreement has been prepared, with details such as the car's chassis number included.

This means the hire purchase agreement can only be prepared after the actual car unit has been allocated to the dealership.

“Now, with the amended Act, a car buyer can place phantom bookings' at several different car dealerships without paying booking fees. This will result in a waste of loan application resources and inefficiencies for banks and car dealers,” said Armin.

He said car buyers would have to pay more visits to car dealers or banks to sign documents.
With the amended Act, car dealers would face cashflow problems as they would lack the booking fees and downpayments as working capital to pay for the cars ordered from their principals.

Armin claimed that the Government did not consult stakeholders before implementing the amended Act.
Meanwhile, car dealers and marque franchise holders have expressed unhappiness over the issue and said the car buying process now involved more paperwork.

“We are studying the implications on our current vehicle-promotion packages,” said an industry source.
One car dealership manager in Alor Setar said the amended Act made it tough for dealers to offer “zero downpayment” or “full loan” packages.

Perusahaan Otomobil Kedua Sdn Bhd managing director Datuk Aminar Rashid Salleh said while the company supported the amended Act, automakers that sold cars in high volumes might see sales impacted.
“We may not be able to efficiently register the vehicles on time for our customers, especially during the month-end rush.

“This is due to the longer process flow that requires detailed paperwork between the banks, Perodua and our customers.”

RELATED ARTICLE:

http://star-motoring.com/News/2011/Amended-Act-expected-to-hurt-car-sales.aspx

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