Demos: to buy, or not to buy

WHY WOULD YOU WANT A DEMONSTRATOR OVER A NEW ONE?
When new cars were expensive and waiting lists were long, a dealer's demonstration model could get you into a new car a year or two ahead of everyone else. During those times when owners needed their warranties to get their new cars built properly, a demonstrator could short circuit this process when they were run-in and fully prepared in the dealer workshop to deliver their best.

Immediate delivery of a new model that didn't need to come off the road for warranty work was enough for some buyers to pay the full price, sometimes more.

In today's market of factory paid on-road costs, longer new car warranties, annual model upgrades, extra value specials and intense competition, a 'demonstrator' in this early context is no longer relevant.

WHAT IS A DEMONSTRATOR?
So what is a 'demonstrator' circa 2008? As the name suggests, it once exclusively described the car that the dealer used to demonstrate the very best of what the latest model had to offer. They were looked after like a baby and frequently optioned-up with all the best extras.

They often had some neat little tweaks to make sure that a prospect's next drive would be driving home in a brand-new version of the same car.

While true 'demonstrators' still exist, the definition has been stretched a little. Demonstrator or demo is now frequently used as a smokescreen for dealers to publish the discounted prices of brand-new stock. Even if the law forbids price fixing between dealers, advertising big discounts doesn't help the resale prospects of a new car and can incur the wrath of the manufacturer and other dealers behind closed doors.

Advertising a big new car discount on a 'demonstrator' allows the dealer to attract buyers without publicly killing the price of a new one.

In these cases, there has to be a demonstrator as described somewhere but the strategy is to get you as a potential buyer to contact the dealer at which point you might find that you can buy the very same car, brand new, for the same price.

All you have to do is ask. Be aware that a variation of this strategy is to get you into the showroom to view an unwanted or unpopular variation of a model advertised at 'demo' pricing then up-sell you into one that you would actually want to own!

The first step when you go shopping for any demonstrator is to investigate whether you can get the same price on a brand-new example of the same car. Or even better...

If it is not a brand-new car, then you need to treat it just like any other used car. Whether it has 1500 or 8000 km on the odometer, it has been on the road long enough for it to lose its 'newness' despite appearances.

Or it could have been damaged during delivery. Accidents do occur during shipping and at various points in the delivery process. One of the few options open to a distributor or dealer if the damage is more than superficial is to register the vehicle as a demonstrator or company car then sell it after it has been on the road when a buyer's new car expectations might not be so high.

As with any vehicle that has been on the road, getting it checked by an independent source could be important for peace of mind.

Checking out alternative sources of near-new stock, so you can identify exactly what you are looking at, can also be important when the demo might be a superseded model. After all, clearing a demonstrator because it no longer represents the latest specification or is going off the market is a fundamental reason for selling.

RUNOUT MODELS
In an era of instant communication, manufacturers cannot hide the impending arrival of a new model. To clear stocks before the new one arrives, dealers and the factory either have to wind down new stock, and lose valuable market share, or discount the price to maintain current volumes or add sought-after extras at no cost.

Despite the best planning, a sudden change in market conditions or a late shipment can cause an unexpected stock build-up of the outgoing model. By offering these cars to employees and families within the dealer and factory system, their disposal can be postponed until well after the launch of the new model.

These cars can be outstanding value as the kilometres are usually very low (under 10,000km), they are treated well because the employee has a financial stake in the car and they carry full factory clearance discounts, as well as some extra price cuts for the kilometres they have travelled.

The manufacturer will often 'top up' the warranty so it matches a new one. These cars are often presented as 'factory demonstrators' and are very different to the factory clearances of staff company cars.

When two manufacturers are slogging it out in a close-run battle for number one, registering new cars at the end of the year (under these same circumstances) can mean the difference between winning and losing.

As these cars trickle back onto the market early in the New Year when the local factories are closed and fleet buyers are on holidays, they can be great buying. Because manufacturers have learned that this brings new car sales to a halt until they are cleared, this practice is no longer as common as it used to be.

DEALER DEMONSTRATORS
There are several categories of vehicles promoted under this label.

It is now commonplace to offer service customers the use of a loan car. This facility is sometimes used to promote the latest model, thus the loan car is often a brand-new premium model and driven without dealer supervision.

The loan period can extend to several months if a customer car requires a long stay in the service bay, until the factory can source parts or develop a fix. The discussion forums on certain websites are filled with horror stories describing what some of these cars are put through by drivers who have no financial stake in them.

Often a dealer will source an unusual or special model for members of the family or even themselves. They are rarely driven by customers. Because the boss' car gets special treatment in the service bay and they are usually changed over at very low mileage, these cars can be absolute winners.

Terms like 'MD's own car' or 'MD's wife's car' are commonplace and are worth chasing -- just make sure this is the full story.

It may be rare but it can happen where taking back a new car is often the only way of satisfying an irate customer. In some cases, it may have developed a serious fault or series of faults. In others, the car couldn't do the job it was meant to do or the owner simply hated it. In even rarer cases, the car may have been smashed-up during a service and the owner has refused to take it back.

One option for placing such a car is to feed the car into the demonstrator or loan car fleet. It is fairly easy to identify these cars when they will have been first registered to someone other than the dealer or manufacturer. Checking its registration history is as important as it is for any used car.

In an ideal world, you should be told of its exact history yet by careful omission, you can sometimes be guided into making assumptions that are not correct. 

Another source is a cancelled order for an unusual specification or colour that nobody wants. Getting some demonstrator exposure and discounting on it can suddenly make it more appealing.

Over the years, I have rejected many new cars on behalf of clients when they have been concealing body repairs, colour changes and other repairs between the factory and the dealer. One of the few options to clear such a car once it has been identified is to offer it as a demonstrator where the expectations are not as high.

Some dealer demonstrators can work hard for a living and there is usually a critical point and odometer reading where they need to be moved on before they look too used.

In these cases, check whether you can live with any blemishes or early wear and whether the savings over a new one are adequate compensation. A privately-owned vehicle with twice the mileage but less wear and tear might be a better buy.

Don't be afraid to demand rectification if you are not happy with some aspect of a 'demonstrator' especially if the dealer won't budge on price. There is a good chance the dealer has already allowed for it and can rectify it much cheaper than you can anyway.

FACTORY DEMONSTRATORS
Importers and manufacturers normally run a selection of new models, some of which generate great used buys while others have packed a lifetime of hard usage into a few months.

Most car companies run a VIP fleet of new cars for product placement at sporting or special events. Some are given to company ambassadors who are usually prominent members of the community. Others are assigned to corporate visitors for personal use while they are working on special projects in Australia.

Often a special promotion or sponsorship deal includes access to a selection of new cars. Holden's Sydney 2000 Olympics and Toyota's Melbourne Commonwealth Games fleets are such examples. The Holden games fleet was so big that the maker made a feature of it.

The latest models are often assigned to key component suppliers to allow them to develop local replacement parts such as brake pads or accessories. Others are used for special customer days at racetracks or other venues or for fleet assessment.

Some factory employees have company car plans that maintain a turnover of new vehicles every three to six months. These staff can often work in a field where they have to promote the latest model or monitor the quality of various components. These cars can also be gems when they are well-serviced and do exactly the right mix of short and long distances when the car is new.

Last but not least, is the company press fleet. Although companies are now much stricter about who drives the press cars and what they do with them, there is still a rogue element at the margins who insist on treating them differently from a car paid for in their own hard cash.

PROGRAM VEHICLES
This innocuous little term implies that the car has been assigned to a program but in fact, it is more likely to have spent its time in a factory-backed rental car scheme. Alternatively, there are company car leasing schemes that include a buy-back component by the manufacturer or the importer.

The savings are huge but they are not 'demonstrators' when they are usually turned over just before their heavy usage becomes too obvious.

FACTORY EXECUTIVE CARS
These are company cars driven by employees as part of their salary package and can be a good source of cheap, low mileage cars when they are often assigned to spouses or other family members who cover very low distances. Some factory retirement packages include the ongoing supply of the latest model.

Depending on when they are first registered, these cars can come off fleet far earlier than other company cars if they are replaced as soon as a new model arrives. They are usually disposed of in a highly-competitive internal dealer-only auction system after which they are then retailed.

Because they are well-serviced and sorted, they can be great buying especially if its factory owner used internal clout to get a unique feature or colour combination.

COMPLIANCE PLATE CLEARANCES
The calendar year timing of the change in year stamped on a new vehicle's compliance plate has caused the new car trade ongoing grief for some years. The last of the year's stock must be cleared during a period when buyers are distracted by Christmas, then what doesn't get sold has to be shifted when buyers are away on holidays.

Like Australia's Boxing Day sales in department stores, the ever resourceful motor trade has turned a problem into a selling spree. Instead of treating a January sales slump as inevitable, many dealers and manufacturers are now using this period when buyers are more relaxed to build up retail sales. There can be great pickings but only if what you really want is on offer.

One of the first ploys was to shift annual model changes to the July-October period so a December 2007 delivery is no different to a January 2008 model. The other ploy is to hold back stock and not attach compliance plates until the new year. It is at this point that it's handy to know the rules.

There is a date when a car is built, a date when it is fitted with an Australian compliance plate and a date when it is first registered. When these three dates can vary considerably, the gaps between the three of them are of greater interest than each date in isolation.

Most imported cars are held in bond which is usually a large storage facility that treats the car as not reaching Australia until the local distributor is ready to send it into the retail chain. It is only at this point that the car is dated and complianced for sale in Australia.

Add in shipping time and the gap between when the car was built and when it was complianced, is usually at least a month. However, if a car stops selling, this period has been known to extend to several years.

Complicating this process is when a new Australian Design Rule dictating new emissions or safety standards takes effect. If a new car that is already in Australia doesn't meet this new standard, it has to be complianced before the new rule applies. This creates an immediate problem for the manufacturer or distributor when the vehicle now has a compliance plate with a date on it but there is no buyer.

From a buyer's perspective, the vehicle's age in terms of warranty coverage starts when the vehicle is first registered. However, if the vehicle's compliance plate is dated the previous year this can impact on resale value.

An older compliance plate can also indicate that a vehicle, even if it is still new, has an earlier specification than the model currently on sale. It also might not comply with the latest Australian Design Rules.  Depending on the nature of the Australian Design Rule changes, this might not always be a disadvantage.

The presence of a recent compliance plate can only indicate compliance as of the date stamped on the plate. It cannot always indicate whether that vehicle is built to the manufacturer's latest specification when the model code doesn't always change during an upgrade. Only the car's build date and numbers can settle this issue.

There are so many reasons why these discrepancies exist, including cancelled orders, shifts in supply, price cuts and specification changes, it pays to find out why a particular model is being cleared and why it has been hanging around unsold.

A good example was the shift in supply from Japan to Thailand for the Honda Civic and Nissan Tiida. Astute buyers were able to buy the Japanese-built versions of these models at the lower Thai-built price during the changeover, when the manufacturers needed to standardise features, prices and marketing as quickly as possible.

The same happened when Holden stopped sourcing the Barina from Europe and switched to Korea. To clear the superior [Ed: and manifestly different] European model, Holden sold the last European Barina stocks at Korean prices.

The major concern with "cars on the grass" is determining exactly when the time-related service items are due. Most new vehicles require major fluid changes at two years regardless of usage to maintain the warranty. On some new cars that have been sitting around unsold, these fluid changes can be due almost immediately after purchase.

Determining exactly when these service items are due (and who pays for them) to maintain the warranty, needs to be clarified in writing during the purchase as the policy on this issue can vary considerably from manufacturer to manufacturer.

BUYER BEWARE

At the end of the day, the dealer and manufacturer must clear their near new stock at a big enough saving to tempt you away from a new one.

The internet has changed the landscape when dealers can advertise demonstrators and registered clearance stock as legitimate used cars, at competitive used car prices. The bargains can be bigger than ever but so are the risks...

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