Drivers locked in to high key costs

JASON KRUPP
Last updated 05:00 16/12/2012

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It's probably happened to everyone at some stage - that annoying experience of losing car keys. But the introduction of the "smart" key has turned the loss into a costly, rather than just frustrating, exercise with car dealers being accused of extreme price-gouging on replacement keys.

Videographer Marcus Wild discovered that first-hand when he recently went to a Wellington Volvo dealership to get a spare key for his 5-year-old S40 model car.

He was quoted $645 to replace the two-button plastic fob, including programming the new one to his car - that's about the same as walking into an electronics retailer and buying a 32-inch Samsung television off the shelf.

It's a far cry from the metal-only keys last seen on car models from the 1990s, which cost as little as $10 and a trip to your local locksmith to replace.

The motor industry says the high prices are a response to pressure from insurers to step up anti-theft security measures.

The new keys contain a transponder which is uniquely coded using specialist equipment, and any replacement key needs to be checked off against chassis and registration numbers.

"The multi-function device and the comprehensive security it provides is relative to its cost," said Stephen Kenchington, general manager at SVD NZ, which holds the Volvo franchise in New Zealand.

Volvo is not alone in its smart key pricing - a survey across major car manufacturers shows replacement costs start at around $400 for some Korean brands, quickly climbing for Japanese brands before topping out near the $800 level for luxury European vehicles such as Mercedes.

That defence of the high prices holds no water with Clive Matthew-Wilson, editor of the Dog & Lemon car review website, who labelled the practice as "an absolute price gouge" by dealers who've locked customers into a brand value chain.

He estimates it costs car manufacturers between $1.50 and $2.50 to produce a smart key, giving them a crude markup of 25,000 per cent in the Volvo example.

"There is a certain amount of admin involved in handling 10 million vehicles with 10 million keys and no-one would mind paying $50, but there is no credible scientific reason for keys to cost so much," Matthew-Wilson said.

The smart key has also changed the way locksmiths operate, according to Matthew Langenkamp, who runs autokey.co.nz.

The site charges about $150 for a full replacement smart key on some Japanese models, but these still need to be coded to the vehicle, which can be done only at the dealer for between $120 and $200.

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He said introduction of the devices has meant locksmiths have had to invest in specialist electronic servicing equipment costing between $80,000 and $120,000. And these often run on token systems, meaning locksmiths can replace only so many keys before they have to go back to the manufacturer to buy top-ups.

"The dealers, their business model is: Let's charge people as much as possible for replacement parts so we can make as much money as possible," Langenkamp said.

Both Matthew-Wilson and Langenkamp say car owners can try limiting costs by shopping around at locksmiths and online, but the digital sync of the smart key to your vehicle still needs to be done by the dealer.

Wild has since sourced a key for his Volvo from a genuine parts supplier in Chicago for US$120 ($156) including shipping, and has been quoted $120 by Armstrong Prestige in Wellington to complete the coding.

Vernon Brown, service manager at Armstrong Prestige, said the dealer will install parts that customers have sourced themselves - provided they are genuine, and added that "when we order a part it's from a catalogue, and we don't have much power over the price".

Although online is a cheaper option, Matthew-Wilson said car owners would start to see real traction on smart-key pricing only if they started making their displeasure with the manufacturer widely known.

"These days, these things can go viral, and if named and shamed enough, car companies will change their behaviour," he said.

The smart key was just one example of auto-industry price gouging. Another was airbags where replacement costs sometimes ran so high it was cheaper to write off the car from a simple bash of the bumper than it was to repair it.

- Sunday Star Times

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