Why do we pay more for cars

New-car prices are at record lows and driving a sales boom, but a survey by News Limited has found Australians still pay more than buyers in the USA. In some cases the prices are more than double.

The Nissan Pulsar and Toyota Corolla have both limboed to $19,990 locally in the past six months -- the same price they were 10 years ago. But the same models in North America start at between $16,140 and $17,850 respectively. The Australian dollar has had parity with the US dollar for two years.

Australia’s top-selling car, the Mazda3, has a recommended retail price of $20,330 locally (before on-road costs are added) but the same car starts at $18,370 in North America.

The gap widens as prices rise. A Toyota Camry starts from $30,490 locally but the same model is $24,460 in the USA.

Mazda’s mid-size sedan, the Mazda6, has an even greater price disparity -- more than $10,000. It’s cheaper than the Camry in the US but dearer than it in Australia ($33,460 versus $22,968).

Mazda Australia spokesman Steve Maciver said standard equipment varies from country to country: "We look at how we compare to our rivals and we are happy with our prices. We believe we offer good value for money."

More glaring examples begin in the $50,000 price bracket. A BMW 320i sedan in Australia costs $58,600 (just below the Luxury Car Tax threshold) but in the USA can be had for the same money as a Holden Commodore: $35,805. The Mercedes-Benz C-Class sedan has a greater disparity: $67,900 here versus $35,350 there.

The car industry argues new-car prices are higher in Australia because it costs more to recoup the development costs of right-hand-drive cars given that the markets are smaller.

“Volume is king and more cars are sold in left-hand-drive countries than in right-hand-drive countries, so the customer has to pay,” said Mercedes-Benz Australia spokesman David McCarthy. “We have worked hard to make our cars as affordable as possible, and put more equipment in them, and still make a profit.”

McCarthy said shipping costs are also higher because the distance is greater and the car carriers mostly leave Australia empty: “it’s a one-way trip”. The cost of financing vehicle orders also ties up more money because of the longer delivery time from Europe. “We as a wholesaler pay for each car as it leaves the factory gate, then it’s in transit for up to three months before the customer pays for it.”

German sportscar maker Porsche last week slashed prices across its range – by as much as $36,000 in some cases. But Australians still pay more than double than those in the USA for one of its speed machines.

A Porsche Carrera 911 was $229,400 in Australia before the price cut, but will drop to $206,500 from June 1. That might be cause for celebration for some, but the champagne loses its fizz when you discover the same car starts at $92,730 in the USA.

Australia’s Luxury Car Tax accounts for an extra 33 per cent of the Porsche’s price above $59,133 (the threshold set by the Federal Government). But that still doesn’t explain why the Australian price is more than double what it is in North America.

When asked why there was still such a large price anomaly, Porsche Australia spokesman Paul Ellis said: “You don’t price your car against what it costs in other countries, you price it against its local competitors. It’s market positioning.”

Prestige brands have strongly opposed Luxury car Tax since its inception in 2000, even though Toyota now pays more LCT than any other brand due to the large number of SUVs it sells over the threshold.

Porsche says the LCT is a “discriminatory tax”. “There isn’t a tax on other luxury goods. Cars are seen as a soft target,” said Ellis.

This reporter is on Twitter: @JoshuaDowling

Car / Australia / USA
Nissan Pulsar $19,990 / $16,100
Toyota Corolla $19,990 / $17,850
Mazda3 $20,330 / $18,370
Toyota Camry $30,490 / $24,460
Mazda 6 $33,460 / $22,968
Mazda CX5 $27,880 / $23,315
Mazda MX-5 $47,280 / $26,092
Toyota Prius $33,990 / $26,620
Mercedes C250 $67,900 / $35,350
BMW 320i $58,600 / $35,805
BMW 335i convertible $112,900 / $59,180
Range Rover HSE S/C $224,400 / $91,900
Porsche Carrera 911 $206,500 / $92,730

Source: Car manufacturer websites. All prices are in Australian dollars and do not include special offers or on-road costs. A 10 per cent sales tax has been added to all US prices (to match Australia’s GST, which is included in RRPs) even though the US national sales tax average is 7.5 per cent (from 3 per cent in Montana to 11.725 per cent in Arizona).