When Tanya Pampalone was told her car’s warranty was up five months before it was due, she had a hard time finding out why. That’s when she delved into the world of dodgy motor industry practices where it’s almost impossible to get a straight answer. Unless you’re willing to ask a lot of questions — and put up a serious fight.
My BMW dealer is no longer speaking to me. I think it might have been something I said.
Our relationship started to fall apart when a plucky salesperson by the name of Danica phoned in early July and asked if I wanted to renew my motor plan. Yes, of course, I told Danica, but my warranty only comes due in April 2019 as I bought my car in April 2014 — the whole standard five year, 100,000km thing. Oh, said Danica. I have here on my system that it comes due in November 2018. How many miles do you have on your car, she asked pleasantly. Well, I don’t drive much, I said. It’s only about 52,000km. Oh, that’s strange, said Danica. She said she’d see what she could find out.
I didn’t think about it much — surely it was just some weird logging issue in their system and they’d sort it all out. That’s how it’s done, right? My car happened to be a BMW. A bottom-of-the-line BMW, but a BMW. BMW is fancy. It is all German and orderly and proper and correct. Right?
It’s been six months since that first call from Danica. Now I know more about the unsavoury parts of South Africa’s motor industry than I ever wanted to. Basically, it boils down to this: If you’re buying a car and something goes seriously wrong — possibly even illegal — don’t expect your dealership or the manufacturer to own up. And if you aren’t willing to put up a fight, you are going to have to take whatever they give you, no matter how egregious the practice.
Things fall apart
I mailed and called Danica a couple of times to find out what had gone wrong with the warranty registration, but she wouldn’t get back to me. I was sad. I liked Danica. And I wanted to find out what was happening with my car.
So, in August, I called BMW South Africa. Temoso filed my concerns. He was pleasant and patient and listened to me. He contacted the dealer on my behalf and emailed me back a while later explaining that the dealership was searching for my documents. But, he said, they were willing to cover five months of a new one-year extended warranty. They lost my documents? How is that even possible? No, I told Temoso, I do not want a new warranty. I want mine honoured. And I want my documents.
But Temoso said BMW South Africa’s “intervention in this regard is purely to make sure an amicable solution is reached”. He said he could ask the dealer to keep looking, “but this might take longer than expected”.
In September, Kotie, who heads customer relations over at Sandton Auto, phoned me, insisting she still could not find my documents. She blamed Metrofile, the digital storage company. But, she explained, it was all a mere matter of a “pre-report”.
This was where things started to get interesting. Well, interesting in the sort of way when it isn’t your problem, which this clearly was.
“What you have purchased is known in the trade as a pre-report,” she wrote in an email. “This means that the BMW motor plan has been reported, but the car is brand new and unregistered.”
She went on to say I got a discount on the car because of this “pre-report” status — which meant, for some reason I wasn’t yet privy to, the car’s warranty was mysteriously registered five months before it was sold to me — not because I was going to buy a demo at another BMW dealership and I negotiated down based on this. I told Kotie I wanted my documents. All of them.
Two weeks later, I mailed Kotie asking if she’d had any luck. She said she had. When I arrived that afternoon, Kotie feigned a well-practised civility. She handed over a copy of my pre-agreement statement from BMW Finance, which said my car was a new, 2014 model. That was all she had. Her offer of picking up the tab of five months on an extended warranty was still on the table, she said.
I was seething by the time I met Marc Simon, the square-jawed manager in a well-pressed dress shirt, who invited me into a glass-walled boardroom on the second floor near his office. I told Marc and Kotie that I just wanted my warranty honoured. Marc told me I had no proof I wasn’t told about the warranty — that salesman was long gone so we can’t ask him, he said. But you lost my paperwork, I told him. He brought up the discount and shrugged. That warranty is up in November and there was nothing he could do but sell me an extended warranty. Take it or leave it.
I told Marc I was a journalist. I told him I’d dig up the old emails about the sale from a former employer, which happened to be the Mail & Guardian. Marc did not care. I hated Marc.
The last thing I wanted to do was write a story. Writing is hard. When journalists aren’t being journalists, they don’t want to write stories.
My husband told me it wasn’t worth the stress. He said to take the five months. It’s unethical! I whined. It’s illegal! My friend Laura, a fellow journalist, squashed up her face when I told her over coffee that I was going to write a story. “Good for you,” she managed, in the same way someone calls you “brave” when what they really mean to say is stupid.
I sighed. I was going to have to take this on. Because, while BMW clients might not be the consumers most in need of an advocate, the blatant disregard for the consumer — in this case, me — was startling.
Set up 19 years ago as a voluntary organisation, the Motor Industry Ombudsman of South Africa (MIOSA) was accredited in January 2015 by the Department of Trade and Industry (DTI), making it a parastatal which advises and makes recommendations to the National Consumer Commission (NCC) regarding automotive consumer complaints. Both operate under the Consumer Protection Act of 2008. Those in the motor industry are required to register with MIOSA and pay a monthly levy to help support its work, but it reports to government.
One of their primary missions, according to the MIOSA website, is to rule in cases between disgruntled consumers and motor industry dealers, manufacturers, importers and service providers.
The process works like this: Consumer files complaint. Complaint is forwarded to other party for comment. Other party has 10 business days to comment. If other party responds, case is sent to case manager for conciliation and finalisation. If other party refuses or neglects to respond, matter is referred to NCC.
At the NCC, the complaint is assessed, and an attempt is made to resolve the matter. If that’s impossible, they refer for prosecution or settlement. If the investigation recommends settlement, and the supplier is willing, the offer will be considered by NCC. That offer will be incorporated into a settlement agreement which is taken to the National Consumer Tribunal (NCT) and converted into a binding order. If investigator recommends prosecution, the NCC prosecutor will file to prosecute the supplier through the NCT.
Together, MIOSA and the NCC are the agencies which protect the consumer when dealing with the motor industry, which a 2018 Econometrix report says makes up a whopping 7.7 percent of South Africa’s GDP. And that’s where things get complicated.
Following the paperwork
I called some friends in the motor industry. They asked if I had a document named a Warranty Registration Certificate. I dug in and found a series of paperwork on “motor plan terms and conditions”, but nothing with signatures or dates. Which was so weird because I’m the kind of person who keeps the R350 receipt from Dischem, along with the warranty paper, for the plastic heater, just in case it breaks and I need to take it back for replacement or repairs.
It turned out that it would be those words — Warranty Registration Certificate — that made Kotie stop talking to me. After I asked for it in a follow-up email, and about more information regarding the practice of pre-reports at the dealership, our turbulent, short-lived relationship was over.
“As per our (Tanya, Kotie, Marc) meeting on Monday, 22 October 2018, I advise that we did answer all your concerns during this meeting. Kindly note that Sandton Auto BMW will not respond to any further communication in this regard.”
Temoso and his boss at BMW Finance, Nkululeko, were both cc’d on that email, so I pleaded with him to help. How do I get my documents? Where is the Warranty Registration Certificate? Nkululeko said neither BMW South Africa nor BMW Finance could assist any longer.
“Perhaps you should seek independent adjudication through MIOSA. Please consider this to be our final position on this matter.”
It was official, no one at BMW was talking to me any longer.
I headed for the MIOSA website and filed my official complaint.
Not their first rodeo
Guys like Marc are Teflon-like with complaining clients. They deal with angry customers all day long, some justified, others not. But they usually pay attention when you say you’re a journalist.
But not Marc. This might be because Marc is the executive director for the Daytona Group. Owned by Bluespec, a holding company which is a major player in the motor industry repair and recovery industry, they own a span of companies including FirstGroup, the Renew-it Group and Auction Nation, as well as Daytona and a few others. Daytona, meanwhile, imports exotic cars such as Aston Martin, Rolls-Royce and McLaren, and owns Audi Centre Northcliff and Sandton Auto BMW.
They were also the owners of the BMW dealership in Melrose Arch. You might have heard about them.
They took centre stage in a Carte Blanche investigation which aired in July, showing how the dealership scammed a whole lot of people with a fake cash-back dealer-assist investment scheme linked to a non-existent oil company in Dubai. But, despite dragging BMW’s name through the investigative mud, it is business as usual in Sandton.
The Daytona cowboys had seen far worse than me. Nothing touched them.
Besides, BMW South Africa has bigger problems than cowboys and pre-reports and silly Carte Blancheexposés. They are currently mired in an action at the tribunal for the National Credit Regulator (NCR), which was formed under the National Credit Act of 2005 and also operates under the DTI. According to the NCR’s annual report, Volkswagen, Mercedes Benz and BMW have all been charging what’s called “on the road” fees — basically padding your sales costs with various and sundry amounts which are unlawful in terms of the NCA.
“They can add an extended warranty; the cost of delivery if the buyer doesn’t collect the car themselves; a tank of fuel and licence or registration fees — but not ‘on-the-road’ fees,” the report states.
BMW has contested the action — claiming deals are made between the dealership and consumer and has nothing to do with the manufacturer — but the regulator has launched a wide-ranging investigation into the entire motor industry around the apparently widespread and accepted industry practice.
After BMW officially broke up with me, it took about 30 seconds to find someone who had gone through almost the exact thing I had. I Googled “fraud” and “BMW Sandton” and a post on Hello Peter, the consumer complaints website, popped up.
“I purchased a Bmw 330i (E93) from BMW Sandton Auto in 2014,” Shikar wrote in April of 2016. “Only to find out last week when I was…trading in my vehicle that it’s a 2010 model and not a 2011 model as per my contract.
“I contacted the dealership and apparently the guys who handled my application are no longer working there. The only thing they are willing to do is pay for is a one-year extension on my motor plan. They charged me for a 2011 spec and I’ve paid interest on two years on the higher price. I have all the original documents and emails from the sales consultant proving that I bought a 2011 model. I also looked at the dealership documents. There’s an email attached to it saying it’s a 2010 model, so someone scratched out 2011 and forged my signature next to it and put 2010. This is fraud.”
I tracked down Shikar. An insurance broker based in Durban, he calmly recounted his story. But back in 2016, Shikar was furious. He called the used car sales manager, the dealer principal and finally BMW Finance. All that was on offer was an extension for a year. You can’t sell me a 2010 car and tell me it was a 2011! You cannot forge my signature! Shikar went further up the BMW food chain. He emailed the managing directors at BMW in Germany. He mailed the CEO. No response.
“I didn’t want to let go,” he told me. “But I realised no one was going to help me. Then I was like, okay. I was tired. I accepted their deal. That’s what people do, they just get fed up and agree.”
But what’s a pre-report?
Now I needed the official line on pre-reports from BMW South Africa.
Their spokesperson, Alexander Parker, told me it worked like this:
“Sometimes in the course of business, cars are registered without being sold (for example, when a customer cancels a deal at the last minute, or a car is registered in anticipation of a sale, or for some other reason). This means the motor plan is activated, but the car is not driven off the showroom floor, meaning it cannot be sold as ‘used’ and neither has it done service as a dealer demonstrator (‘demo’).”
He also told me that “dealers are required to disclose this” and “cover the shortfall within the pricing structure of the deal/vehicle”. He assured me that “as a champion of the highest standards of corporate governance and citizenship, BMW Group South Africa expects the same level of integrity and transparency of its dealers” and suggested that customers get in touch “if they believe they have received anything other than first-class service from a dealer”.
Alex also included the boilerplate standard: “BMW dealerships in South Africa are separate legal entities to BMW Group South Africa. We do not have shareholding in any dealerships, and as such in terms of the law, we are not allowed to intervene in an arrangement made between a dealer and a customer.”
Translation? Not happy with your BMW dealership? Too bad. BMW South Africa won’t really be able to help. That’s between you and your dealer.
But what bothered me more was Alex’s description about a pre-report. He said it was the result of a sale gone wrong “or some other reason”. I’d soon find out that the latter was far more likely.
After 20 business days, I didn’t hear anything back from MIOSA, so I called. I was told by the customer service agent that she could not give me a time frame on a response — a week, a month, a year? — as each case is different. She recommended I call in every third or fourth week to check in. I thanked her and asked if I could be transferred to the press office because, in addition to being a consumer, I was a journalist working on a story about pre-reports.
No, she could not do that. Consumers cannot talk to the press office and, apparently, you cannot be a consumer and a journalist. That’s just not in the manual. I asked to be put through to a manager. Pragasi got on the phone.
“I’m not going to comment,” she told me. I told her I’d need that refusal to comment in writing.
Early the next morning, an email from the ombudsman, Johan van Vreden, arrived in my inbox. He asked me to please explain what I meant by a pre-report.
“This is not a term that I am familiar with,” he said.
I sent Johan a link to a TimesLIVE article to enlighten him. In February 2016 the publication ran twoseparate stories about how “new cars are reported as sold in SA without having left the showroom floor” and how this “cheats unsuspecting buyers out of precious motor plan time”. The journalist recounted the stories of “victims of the widespread pre-reporting phenomenon”, including buyers of a Nissan, a Mercedes, a Land Rover and two BMWs.
Johan didn’t mail me back. But by then, I was well-versed in its meaning.
Chasing rands and cents
“It’s a widespread practice,” a dealer principal in Johannesburg explained to me, on the condition of anonymity. “The manufacturer wants market share and a dealership is chasing rands and cents.”
He explained incentives like this:
“Let’s say the sales target is 50 cars for the quarter. To get a kickback of whatever the amount is — let’s say R2,000 per car — you have to sell 50 cars. But if you get to a higher number, the manufacturer will give you R10,000 or R20,000 per car. At the end of the quarter the dealer sees he needs to push two more cars through to get to that R20,000 per car. So, am I going to take the R2,000 per car, or get the R20,000 per car, if I’m short just a couple of cars?”
The trick, though, is that these cars have to be reported as sold. And in order to report the cars as sold, my source tells me, the warranty has to be registered — in this case, in the dealership’s name because there isn’t an actual buyer.
“But they are still brand new cars,” he says. “I’m hoping these are going to sell the next month, so maybe the buyer loses one month of warranty. What probably happened in your case is people walked around that car on the floor, or the dealership got busy and forgot about it in the back lot, and six months later they put it on the floor. And the salesman was too scared to be honest because he needed the deal.”
It was possible that a sale fell through like Alex had described, but it wasn’t likely, he told me. So, I asked, isn’t the manufacturer culpable? Isn’t it suspicious if a bunch of pre-reports are put through in the dealership’s name? Isn’t it obvious that’s what’s happening?
“Well, that’s what we’re doing with all our demos as well,” he tells me. “Each month, I get new demos. So maybe a dealership could have five legit demos, and five pre-reports. How is anyone going to know the difference?”
When Crystal Slabbert landed on John Maytham’s show on CapeTalk in July 2018, the call lines lit up with angry consumers.
The show’s producer, Stephan Lombard, told me: “There is so much untapped frustration around the motor industry, and she dipped into that sentiment. People always get taken for a ride, no pun intended.”
In the self-published book Eff You Very Much: How you are screwed by banks and dealerships when buying a car, consumer activists Slabbert and John Titmus take on everything from pre-reports to “on the road” fees and everything above, around and in between.
Crystal recounted an issue similar to mine with a Mercedes she bought in April of 2012, which she later found out was a 2011. She lost five months of her warranty, just like me. And, just like Shikar, she was sold an earlier model of car.
Which got me thinking. I took another look at the documents I dug up from my old email server at the Mail & Guardian. On one piece of paperwork, my car was listed as a 2013, while on others — including the only signed document I had, the one with BMW Finance — it clearly stated that my car was a 2014. What else wasn’t disclosed about my car?
I was starting to better understand why BMW had “lost” my documents.
“Hi Johan. It’s me, Tanya Pampalone. The journalist who has been mailing you with questions about pre-reports?”
He exhaled in resignation.
“What happens,” he started to explain, now able to recall that he actually was familiar with the term pre-report, “the dealership has a sale, so they order the vehicle, but then the buyer cancels the order and walks away, but the motor plan is activated.”
I mentioned the part about manufacturer incentives, and that not disclosing whether a car was “new” or a “pre-report” short of warranty time seemed like fraud to me.
“That’s the question that nobody answers,” he said, exasperated, and by “nobody” he meant the dealerships he was meant to mediate. “When I buy a car, what about the time that has expired on the plan? That’s where I don’t have a clear answer from motor dealers. It is a difficulty.”
But is it illegal? Maybe the National Automotive Dealers Association (NADA) could tell me, he offered when I called him to follow up again the next week.
“It would not be fair to the consumer. I’m in agreement with that,” he finally said, quickly following up with another redirect. “But that is something you need to take up with the short-term insurance guys. That doesn’t fall under my mandate.”
Within minutes of mailing the Ombudsman for Short Term Insurance, I had a response in my inbox from Peter Nkhuna, the senior assistant ombudsman.
“It is not correct that this would fall within our jurisdiction at all,” he shot back. “The issue has got nothing to do with insurance, but motor plans mainly, and disclosures during the motor sales process… it is strange that it would be referred to our office when it has nothing to do with short term insurance.”
But before signing off, he offered this little gem: “I am personally aware of the practice and have been ‘a victim’ of it previously (not with the same dealership), but that is all I can comment on.”
Maybe someone should tell Johan.
Nada from NADA
By now, I was weary of the run-around. Who was responsible for oversight of the industry? Who was going to give me a straight answer about the practice?
According to its website, NADA represents the owners and operators of new and qualifying used vehicle dealerships. Part of their mandate is bringing relevant issues facing its members to the attention of government at all levels.
I mailed NADA to ask about the practice of pre-reports to find out if it was an accepted industry practice. Their spokesperson, Ilana Salant, mailed me back to say she was unable to comment on my query “due to anti-competition legal guidelines”.
I called a friend who is a senior competition practitioner. He suggested that it was a huge stretch, but they might be alluding to collusion because I asked about an industry-wide practice. He suggested I narrow my query to BMW practices.
I rephrased: “Is this practice, in terms of NADA’s own guidelines, acceptable for BMW to engage in?” They could not comment about that either. Ilana suggested I ask BMW.
Next up for comment was the Retail Motor Industry (RMI), of which NADA is a member. Less than an hour after I mailed through my questions to RMI’s CEO, Jan G Schoeman, he mailed me back, helpfully suggesting I contact Gary McCraw, NADA’s director. I mailed Jan back explaining that NADA would not comment. Neither Jan or Gary emailed me back.
What about this question was so difficult to answer?
What a difference a year makes
The official comment route was getting me nowhere.
I sighed in frustration, explaining what was going on to one of my sources, who then offered to track down my car’s history. I needed to know what it was about my car BMW didn’t want to tell me. Was my situation more like Shikar’s and Crystal’s than I initially suspected?
Within a couple of hours, my inbox was flowing with emails from BMW’s own files. The “new” car I bought – the one that sat on the new car side of the showroom floor when I first saw it, the same place it was when I picked it up with that big grey bow tied to the hood, the one that Kotie assured me was “brand new and unregistered”– was designated in BMW’s own system at the time of sale as an “approved used vehicle”.
Not only that, despite the fact that I am, right now, holding in my hand the original “quotation and pre-agreement statement”, including my signature and that of Sandton Auto’s business manager at the time, Adri Boeije, which states that in April 2014 I was buying a new, 2014 model, my car was actually a used, 2013 model.
But is it fraud?
I needed to gauge the situation in precise legal terms, so I contacted Bartho van Tonder, a young attorney with Thomson Wilks who works in consumer law. While Bartho made it clear that he cannot be seen to be “prejudging” an outcome because my matter was already sitting with MIOSA, he was willing to help me understand the legal framework for my story.
Under the Consumer Protection Act, he wrote in a mail, suppliers are required to “disclose information at the point of sale in understandable language, including written sales records of each transaction” and not “make false or misleading representations”, or fail to “correct a misapprehension on the part of the consumer”.
Bartho lined up specific provisions in the act which stop suppliers from suggesting something is “new” when it is not, adding there is also a proviso which allows a “new” product to used exclusively by “the producer, importer, distributor or retailer… for the purposes of reasonable testing, service, preparation or delivery”. Suppliers are also not allowed to create the impression — and if it exists, are required to correct that impression — that a product “includes certain benefits that it does not, or that it has been used for a period longer which does not accord with the facts”.
But is it fraud, I asked Bartho?
Not necessarily, he said. Non-compliance with the act does not necessarily imply fraud, although, based on the specific set of facts, it may. He lined up the three elements of fraud.
There has to be an intent to defraud.
There has to be misrepresentation involved.
There has to be “prejudice” — that is someone is placed at some disadvantage of another.
I’m no attorney, I’m just a consumer who happens to be a journalist. But this sure looks a lot like fraud to me.
Down to the minute
Just as I was preparing to hit send on this piece, MIOSA sent me an email. It had been six weeks since I first filed my complaint. (While I suspect my ongoing prodding as a journalist ensured the prompt delivery of my case findings, I can’t be sure.)
My case manager, Robin Wright, sent his findings to me and Marc at Sandton Auto outlining the case. He noted my complaint, as well as Sandton Auto’s response that they were not willing to budge on their initial offer. In the finding, Robin advised Sandton Auto that it was unfair to force me to buy a one year warranty in order to reap the benefits of the five months that were due on my “new” car. Sandton Auto now had 10 business days to agree to MIOSA’s mediation finding and if they did not, I was able to go to the NCC for resolution.
Marc replied almost immediately, cc’ing me.
“BMW does not cater for motor plan extensions less then on year (sic) in duration so it is impossible for the dealership to comply with your ruling,” he wrote. “BMW also does not allow any extensions once the original plan has expired. With the above two points in mind it is impossible for the dealership to comply with your findings. Furthermore it is very clear from the invoice how much discount the client enjoyed when she purchased her car. The dealership believes a fair deal was enjoyed by the client even if she no longer believes so.”
Marc, over at Sandton Auto, isn’t going to make it easy for me. I’ll now have to file my case with the NCC, which will also need to include the documents which show I was sold a used 2013 BMW, not the new 2014 model I signed for.
After all this, I’m a much wiser consumer. And, this time, I’m ready for the fight.
Sandton Auto responds: ‘I am sure our side of the story doesn’t suit the client’s narrative’
Invited to respond independently to Daily Maverick, Marc Simon, Managing Director at Sandton BMW, said in an email:
“The car in question was most certainly a new car, the customer is fully aware of that fact.
“The client also received the car at a discount much greater than the cost of an entire year’s motor plan never mind five months’ prorate.
“Like I explained to the client, I wasn’t there when the deal was done, neither were any of my current staff so I do not know what was discussed, however the paperwork shows this car was sold below cost. Deals like this usually indicate a car with the motor plan running. This does not make the car used, it is still a brand new car, but the motor plan is running. Customers are usually very happy with deals like this as they enjoy a great discount on a brand new car. This is usually discussed at point of sale.
“The dealership did in fact offer the client a five-month extension of the plan as a goodwill gesture, but BMW only sells a minimum of one-year extensions. So if having a car in motor plan was of such importance the client would have been happy to pay for the balance of the year. This would have still cost way less then the discount she received in 2014.
“The client declined our offer.
“I do stand by my reply to the Ombudsman. We take them seriously and would not make up a fact. Once the motor plan expires it cannot be extended.
“I am sure our side of the story doesn’t suit the client’s narrative.”
This article was published in the Daily Maverick in January 2019.