What are lemon laws?
A ‘lemon’ is a car that turns out to be a dud after you buy it. For example, if the engine explodes on the drive home, you’ve got a lemon on your hands. Lemon laws entitle you to a refund or exchange for cars that turn out to be defective.
In Australia there aren’t formal ‘lemon laws’, but two major consumer protections still apply to car buying: national Australian Consumer Law (ACL), and state/territory warranties.
Car-buying guarantees in Australia
New and used vehicles purchased in Australia come with guarantees under ACL. The Australian Competition and Consumer Commission (ACCC) says the seller is responsible for finding you a solution if you’re sold a product that doesn’t meet these guarantees. That usually means a refund, repair, or replacement.
Your rights may be different depending on whether you bought from a dealership or a private seller.
Buying from a dealer
When you buy a new or second-hand car from a licensed dealer, you automatically have a number of guarantees under ACL. These rights can’t be taken away, even if there’s dodgy fine print in the contract you signed. The vehicle you’ve bought must:
- Be of acceptable quality, which means a “reasonable consumer fully acquainted with the state and condition” of the vehicle should find it safe, durable, free from defects, acceptable in appearance, and fit for the purpose of that type of vehicle (for example, a four-wheel drive vehicle may need to be usable off-road)
- Match the description the dealer provided, or the demonstration model you were shown
- Be fit for any purpose you told the dealer about before the sale (for example, if you tell the dealer you’re looking for something you can use to tow your caravan)
- Come with title and have undisputed ownership.
You might also be offered a warranty from the dealership for extra cost. However, it’s important to make sure any warranty you pay for offers you substantially more guarantees than the rights you already have under consumer law, or from the relevant statutory warranty in your state or territory (which we’ll get to).
These guarantees generally don’t apply if the issue has been caused by you misusing your new ride. If you bring it back covered in rust after a trip to the beach and demand a refund, you’ll probably be disappointed.
Buying from a private seller
Vehicles bought from private sellers have far fewer guarantees under ACL. You’re only covered if:
- The seller didn’t have the right to sell the car to you, so if it was stolen or someone else has an ownership claim
- There’s an outstanding loan on the car you weren’t made aware of.
Before buying a used car, you can check the Personal Property Securities Register (PPSR), using the car’s Vehicle Identification Number (VIN) or chassis number. This search currently costs $2.
Are there warranties when you buy a car?
Manufacturer warranties
If you buy a new car, you may already have a manufacturer warranty, included in the sale price. Your seller is required to give you a copy, and you should study it to understand what the warranty covers. It’s generally advised to have a mechanic give your car a full inspection to find any issues before the warranty expires.
Manufacturer warranties may not apply if:
- The warranty period has elapsed
- An unapproved vendor doesn’t do your repairs properly
- You haven’t had the vehicle serviced regularly.
Statutory warranties
In every state and territory, dealers are generally required by law to offer an additional guarantee, sometimes called statutory or ‘implied’ warranty.
These guarantees generally apply for a period after you buy the vehicle, elapsing after either a length of time or distance travelled. For example, used vehicles are generally covered for three months or 5,000km, whichever comes first.
Be aware, these guarantees may not apply if the vehicle is too old, or has too many kilometers on the clock, at the time you buy.
The rules vary from state to state and are subject to change, but generally cover you for certain defects that occur after the purchase.
There are usually exclusions, often including damage from misuse, weather, or an accident, but if you have an issue that is covered you may be entitled to free repairs or compensation.
Some of the items/faults covered by a statutory warranty might include:
- Speedometer
- Windscreen wipers and washers (not blades)
- Heater, demister and fan
- Engine defects and serious oil leakage
- Radiator leaks, core damage and blockages
- Brakes
- Serious structural rust in the subframe
What to do if you’re sold a lemon
If you’ve bought a new or used car that doesn’t meet your consumer rights, the seller may be required by law to help. This generally is only the case if you buy from a licensed dealership. As discussed, many of these guarantees don’t apply to private sales.
If there’s a major issue with your new vehicle covered by ACL or statutory warranty, the ACCC says the business must offer you the choice between a refund and a replacement. You might also be able to keep the vehicle, but get compensated for the drop in value caused by the problem. If there’s a minor problem, the business must fix it for free, and if they won’t do it you can get it done elsewhere and send them the bill.
If the dealership doesn’t cooperate, you should contact the relevant fair trading body in your state or territory to lodge a complaint.
How to avoid buying a lemon
- Check the car satisfaction ratings of the model you’re considering on Canstar Blue
- Have a mechanic check the vehicle before you pull the trigger
- Check the PPSR
- Be careful buying from private sellers, at auctions or online.
