Should you buy a demo?

In the past, a demonstrator was the car the dealer would use as a selling tool to convince a customer to buy. The vehicle would be ordered with the very best of what the latest model had to offer, because any advanced new gadget on board represented an opportunity for the smart sales person to 'upsell' the customer, boosting the commission from the sale.

These days, a car may be a demonstrator in name only. The car purchased may be registered by the dealer, as it was in the past, but it may sit at the back of the lot with just delivery kilometres on the odometer. Buyers who lust after a new car, but just can't afford the full outlay could find themselves pushed in the direction of this 'demonstrator', offered a transaction price better than the dealer is willing to concede for a new car, and with the balance of the new-car warranty.

The buyer will have to accept the colour and options in exchange for the lower price, but a lot of consumers are willing to accept that. It's rarely a problem, when the dealers are careful to order a 'demonstrator' in one of the more popular colours, and fitted with the options most commonly chosen by buyers.

Sold with factory paid on-road costs and longer new-car warranties, a "demonstrator" in the modern context can be an appealing alternative to a new car. A demonstrator that has passed through the hands of all sorts of uncaring idiots on a test drive, perhaps not so much.

From the perspective of the dealer and the wholesaler/distributor/importer, demonstrators are a great device for clearing near-new stock at a big enough saving to tempt you away from an altogether new car. Never mind that the demonstrator may be a new car by any definition, notwithstanding it's already registered.

A demonstrator or "demo" is frequently a smokescreen for dealers to publish the discounted prices of brand new stock. The law forbids price fixing between dealers, and advertising big discounts doesn't help the resale prospects of a new car. It can also incur the wrath of the manufacturer and other dealers on the same dealer council.

But advertising a big 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 on the dealer's premises, but you might find that you can buy the very same car, brand new, for the same price. All you have to do is ask. 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 (ie: a 'demo' in the older definition of the word), 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 be in a condition that's no longer new, despite appearances. It helps to know the alternative sources of near new stock so you can identify exactly what you are looking at.

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 in some of the most remote corners of the country. 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.

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.

A 'scorched-earth' market blitzed by clearance discounting of the old model can kill the prospects of sales success for a new model before it even has a chance to make an impact.

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 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 10,000 km), they are treated well because the employee had 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 may even 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, they can be great buying. Because manufacturers have learnt 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.

It is now commonplace to offer service customers the use of a loan car while the customer's car is being serviced. This facility is sometimes used to promote the latest model so the loan car is often a brand new premium model and driven without dealer supervision. The loan period can extend to months if a customer car requires a long stay in the service bay until the factory can source parts or develop a fix. Some of these loan cars are put through hell 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's car gets special treatment in the service bay and they are usually changed over at very low kms, these cars can be absolute winners. Terms like MD's own car or MD's wife's car are commonplace.

It can happen that taking back a new car is often the only way of satisfying an irate customer. In some cases, the car 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 re-selling this car is to feed it into the demonstrator or loan car fleet. It is fairly easy to identify these cars, because the first registered owner will be a private buyer or a fleet operator other than the dealer or manufacturer. In an ideal world, you should be told of its exact history, yet careful omission could 'guide' you to make 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.

Inspection of some new cars may reveal panel damage, 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 customer expectations are not as high.

Most car companies run a VIP fleet of new cars for product placement at sporting or special events. Some of these cars 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 Olympics fleet was the high profile and far reaching. It was so big that Holden made a feature of it. Kia has also adopted this practice for the Australian Open.

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 race tracks 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. Their 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 an element at the margins who insist on treating them differently from a car paid for in their own hard cash. In the same category are those cars that have been subjected to the same sort of biff and bang of the old celebrity races that used to support the Australian Grand Prix each year.

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 or company car leasing scheme that includes a buy back component by the manufacturer or the importer. The savings are huge but they are not demonstrators when they are turned over just before their heavy usage becomes too obvious.

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This article was originally published in 2005 and has been recently updated.