There are pitfalls in the Federal Government's new parallel imports plan but hopefully the changes signal a win-win solution for both dealers and consumers where cheaper cars drive more car sales and increase the levels of vehicle finance.

Australian car buyers allowed to parallel import new cars from 2018.

The Australian car market is going to have to adjust gear at full throttle in order to compete for your business under proposed changes by the Turnbull government that will allow individuals to parallel import new cars from other countries from 2018, by-passing the current heavily taxed import regime.

The changes to the Motor Vehicles Standards Act come as the Australian industry winds down and local production ceases next year. Under the new laws in 2018, consumers will be able to import a new car or motorcycle from countries with comparable Australian standards. It must be no more than 12 months old and have no more than 500 km on the odometer.

A full list of countries with comparable standards is yet to be determined, but among right-hand drive producers, both Japan and the UK already meet the benchmarks. While this won’t affect new cars in the low end market, it will have a huge impact on the already booming high-end sector, with consumers able to bypass the hefty “Australia tax” local luxury brands charge for imports.

The move will also drive down used car prices across the board, but again, mostly in the higher end of the market. The government will also amend the 21-year-old Customs Tariff Act introduced by the Keating government to remove the $12,000 special duty on imported used vehicles from 2018.

What are parallel imports?

Parallel imports are goods introduced into a country outside its conventional sales network.

In Australia, local importers are currently protected by laws preventing people from sourcing new cars outside official channels, but from 2018 buyers will be allowed to bypass dealers – and local importers – by sourcing cars from overseas. It also means we'll have access to new cars not currently sold in Australia.

What sort of cars can I import under the new scheme?

The parallel imports scheme is only open to vehicles built in right-hand-drive that are less than 12 months old, with fewer than 500 kilometres on the odometer. The cars can only be sourced from Japan and the UK for now, though other right-hand-drive markets could become eligible in the future.

Does that mean the price we pay for cars will reduce?

Probably not - but it's still unclear. Few car companies deal directly with the public, which means you will need to pay dealer or broker fees as well being taxed twice for cars bought through the scheme - one lot to Japan or Britain and another in Australia.

The local car market is highly competitive, too, particularly compared with other right-hand-drive markets. Australia's $29,990 Toyota 86 GT costs AUD$45,350 in the UK, while the AUD$27,190 Mazda CX-5 is priced from AUD$46,750 and Ford's AUD$50,900 Focus RS is AUD$60,500 in England, hindering those in search of a bargain.

Japan may prove to be a happier hunting ground, with the AUD$43,500 Toyota Prado and AUD$34,200 Honda Odyssey looking cheaper than Australian listings at AUD$52,990 and AUD$37,610 respectively. But when buyers account for a further 10 per cent in GST, 5 per cent in import duty and thousands more in shipping, insurance and handling fees they will quickly find there are few savings to be had.

Time for change as manufacturers close plants?

While the laws were originally in place to to protect the local car industry, but the government considers them redundant with all manufacturing plants closing.

However, the major car companies selling in Australia aren’t pleased with the proposed changes, with Tony Weber, CEO of the industry industry body the Federal Chamber of Automotive Industries (FCAI) condemning them.

“The FCAI has repeatedly called on the Government to carefully consider the facts before making a policy decision that will mislead everyday consumers,” he said.

“Not only is the Government taking a ‘buyer beware’ sentiment that would see many Australians caught in high-risk situations with their vehicles being outside established service networks; the Government is misleading consumers by telling them a used vehicle with 500kms or one that is 12-months old, is new.

“Brands selling in this country make substantial investments in Australia by way of dealerships, workshops, technology and training to support and service their products. This means consumers can be certain their vehicles can be serviced and repaired appropriately, and that recalls are captured so consumers are informed if something needs to be fixed.”

Nonetheless, car buyers will be eyeing off the possibilities and how much they will save on imported vehicles, with the potential to shave tens of thousands of dollars off current local prices.

"With a wide choice of makes & models to hit our shores, its important that the Australian financial services industry adapts to the imminent changes and adjust credit criteria in order to accommodate the financing of grey imports" says Brad Dale, Executive Director of AFS.

"We have been progressive on this front and already provide an extremely competitive import car loan product to our customers to finance imported vehicles and we look forward to providing our services to a broadening market of car enthusiast," he said.

To learn more about the AFS import car finance product please visit Import Car Loans