The automotive industry is changing the way it counts new-car sales, and you will start to see the difference on showroom floors. Here’s how to drive a bargain.
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Buying a “demonstrator” model is normally a great way to save thousands on a new car.

However, changes to the way the industry counts new-car sales means customers need a crash course in understanding the differences in “demonstrator” models.

“Demonstrator” models were originally designed to be just that: a car the dealer registered for people to take on test drives.

The dealer would usually keep the car for a few months, put a few thousands kilometres on it, and sell it at a discounted price – often with the help of a hidden bonus paid by the car company.

This type of “demonstrator” model will still exist under the new regime and can often be a good buy – but you need to make sure you get a decent discount given the warranty has started, the registration period has already begun, and the car likely has a few thousand kilometres on the clock.

However, there is a new kind of “demonstrator” model that’s now likely to appear on showroom floors in greater numbers: the “undriven demonstrator”.

This is a brand-new car with literally a handful of kilometres (typically between 5km and 10km to get it on and off a boat and a truck), but which has been registered and declared as sold.

The number plates could be attached to the car or, as we’ve seen of late, lying in the front passenger’s footwell or in the boot, to be fitted at a later date.

So-called “undriven demonstrators” can still be a good buy but you need to know a couple of things: the registration and warranty started on the day the car was reported and counted as sold. This could be a period of weeks or several months before you buy it.

This is because car companies must now register a vehicle if it is reported as sold.

Contrary to perception, new-car sales numbers in Australia for the past 20 years or so have not been based on actual registrations; they were “self reported” by car companies after gathering data from dealers.

This suited car companies because they could push new metal onto dealers in order to meet demanding sales targets set by their parent companies overseas.

Under the old regime it was possible for dealers and car companies to declare a vehicle as sold even though it was still in dealer stock or, in some cases, yet to land in the country.

No cars were counted twice, the industry insisted, however thousands of cars were counted as sold but then sat in showrooms for months – or more than a year in some extreme cases – before being sold to a real customer. This grossly distorted the figures as an indicator of true consumer demand.

The industry defended the previous practice of “self reporting” because it said it would take too long to gather the data from registration authorities in each state and territory.

The new requirement to only count registered vehicles has been made possible because the details can now be cross-checked with government databases.

The Federal Chamber of Automotive Industries – which collates the data – says it can now cross-reference the car company’s “self reported” numbers with government registration information in real time.

The FCAI is yet to say whether it will cross-check every vehicle sale every month, or validate a random selection of certain brands.

Other than removing a car from the “sold” list if it doesn’t appear on the registration data check, the FCAI is yet to say what penalties car companies will face if they are caught supplying rubbery figures.

In the US last year at least two car companies were fined tens of millions of dollars by federal regulators for reporting false sales numbers.

It might seem like a storm in a teacup, until you learn that the Australian Bureau of Statistics and market analyst CommSec have for years been using flawed data to measure consumer confidence and demand for new cars on a month-by-month basis.

When buying an “undriven demonstrator”, there is currently no industry code of conduct that obliges customers to be informed of the vehicle’s status.

That said, it would be unethical and misguided for a dealer not to disclose this. CarAdvice understands the industry is looking to formalise a process so that customers are indeed informed about an “undriven demo” before signing on the dotted line.

As one industry insider put it: “They might be called ‘undriven demonstrators’ but, really, they’re registered display models. I can see some customers getting confused”.

What the dealer should tell you about an “undriven demonstrator” is that the warranty and registration may already be a few months old, but you’re saving (in theory) thousands of dollars.

What is yet to be tested is a warranty claim just outside the original warranty period. If the car is brand new (5km to 10km on the odometer) and has not moved, technically the warranty should not start until the customer has taken delivery.

The Federal Chamber of Automotive Industries is now investigating whether or not there should be a more formal process for the start of the warranty on “undriven demonstrators”.

For its part, the head of the Australian Automotive Dealer Association, James Voortman, believes the warranty on so-called “undriven demonstrators” should start when the customer takes delivery, regardless of the registration date.

“We would certainly agree with the principal that the warranty on very low kilometre demonstrator cars – 5km to 20km, say – that are clearly brand-new and have not been driven, should not start until the customer takes delivery. But it is up to the car companies, not the dealers, to determine that.”

It’s a safe bet that most consumer tribunals would regard the day the customer took delivery of a brand-new car as the start of the warranty date, regardless of when it was first registered.