Buying a parallel import. Is it worth it, and why?

Life is too short to drive a car you don't like. That's why some Singaporeans buy parallel imports, and get the new car they want for a discount compared to the official importer.

It sounds too good to be true, which generally means buyers should beware.

What is a parallel import?

An authorized distributorship sells new cars on behalf of manufacturers such as Toyota. The authorized distributorship works directly with the factory to order, import, and sell vehicles, and to provide a 'brand experience' and levels of service specified by the factory.

The authorized distributor obtains 'type-approval' from the authorities to sell that model in Singapore and will be required by the factory to carry an inventory of spare parts as well.

A parallel importer buys the same model overseas - albeit possibly with different equipment levels and sometimes even a different nameplate and then sells it here at, generally, more attractive prices.

Because a company such as Toyota is not going to undercut its official partner, parallel importers are likely to order from the factory through an intermediary such as a car dealer in Japan, or even to take unsold inventory from those dealers.

If the model is being shipped in bulk, then the parallel importer can get type-approval from the Singapore authorities to sell that car here in the same way the authorized agents do, but if not, each car must be inspected before it can be registered here, which could slow down the delivery process significantly.

Car distributer vs parallel importer. Pros and cons

When you are buying from an authorized dealer, the price of the car reflects all the overheads - the brand, the shiny showroom, the staff, the industry fees, marketing and so on. The argument goes that if you buy direct from a respected parallel importer you pay less for the car by cutting out a lot of these costs.

This argument definitely holds true for buying car insurance. Don't pay for a middleman, don't pay for things you don't need, don't pay for a company's expensive CBD office space. Car insurance is simple, this should be reflected in the price you pay.

It's not quite as simple when you are purchasing a car. If you are choosing whether to buy a car through a distributer or parallel importer you need to factor in the following:

Amount you will save after all fees are paid and the car is on the road
Repair and warranty agreements - in writing!
Ease of getting replacement parts
Wait time for the car's availability
Ability to test drive

CASE. Singapore's Consumer Watchdog

If you are thinking about buying a parallel import - tread carefully. Singapore has an estimated 100 parallel importers. Of these businesses, 28 are CASETrust-accredited. CASE is the consumer watchdog in Singapore and is working hard with the Singapore Vehicle Traders Association (SVTA) to verify legitimate traders from possible cowboys.

Where authorized distributors have a business built over years, or even decades, parallel importers can set up in a shopfront today, and be gone tomorrow - possibly with your deposit.

The good news is that the car industry (as a whole) saw a 23% drop in complaints, from 2,335 in 2017 to 1,802 in 2018, according to CASE. Still, as the values of cars are high, and deposits can be significant, so buyers potentially face stiff losses.

This chart shows the distribution of lost prepayments from 2014 to 2017 by industry. The most losses were reported from the auto sector.
Source: ValueChampion

The largest import scam happened in 2014 when just one garage, Volks Auto, cheated 182 people out of more than $6 million. One of the culprits, Koh Chek Seng, was given a 10-year jail sentence in 2017, while his other two accomplices fled the country.

Two parallel importers closed down without notice last year, leaving customers out of pocket by around $300,000.

So how do you know if you're buying from a reputable car trader?

Find out if the dealer is on the alert list of the Consumers Association of Singapore - CASE. Call them and get their advice. If they're not on the alert list, then check if anyone has lodged a complaint against the company. Call CASE on 6100 0315.
Proceed with particular caution if it is a new company. Look them up online and get as much info as possible. It's not enough to have a fancy Facebook page or an advert in the newspaper. You want to see real reviews.
Are they registered with the Accounting and Corporate Regulatory Authority ACRA? All legitimate businesses should be listed.
Transact with parallel importers that are part of the CaseTrust Accreditation Scheme. These dealers are required to maintain a bond to protect consumers' fees and deposits.
Make sure they are members of the Singapore Vehicle Traders Association (SVTA).
If you do go ahead with a deal, collect as much paperwork from them as possible including a log card. You can double-check this by logging onto one.motoring with your Singpass.
Finally, if that deal sounds too good to be true then it probably is. And don't get lured by the freebies on offer either.

Reasons to be concerned about parallel importers

Despite all the warnings to consumers, sales from parallel importers are on the rise. This makes it even more difficult to distinguish the good guys from the bad.
On average there are approximately 120 new reported cheating cases each year. Customers are losing anything from $5,000 to $30,000, which can amount to life-savings for some.
Cases are still pending after a handful of dealers closed unexpectedly at the end of 2016. Again, scores of people were cheated out of thousands of dollars each. The loss to them and their families in some cases has been devastating.