When you can't make lemonade: Explaining Australia's used car 'lemon laws'

No one wants to get stuck with a faulty vehicle, or ‘lemon’, when buying a car. It can be expensive, time-consuming and frustrating, with the experience probably leaving a sour taste in your mouth. So, how do Australia’s laws protect you?

In the unlucky event you’ve bought a dud car that doesn’t work how it’s supposed to, or has seemingly advanced in age in the short time you’ve been acquainted, two types of consumer protection that could be worth exploring are Australian consumer guarantees and used-car statutory warranties.

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Australian Consumer Law guarantees

There isn’t one specific national ‘lemon law’ to rely on in Australia. However, under the Australian Consumer Law, when you buy products and services, they come with automatic guarantees they’ll work and do what you asked for. Motor vehicles (new and used) come under this consumer protection. 

Buying a used car from a dealer

When you buy a second-hand car from a dealer, you automatically receive a number of guarantees under the Australian Consumer Law. These apply for an unspecified but “reasonable time” and include guarantees that the vehicle you buy:

  • is of acceptable quality (including that it is safe, durable and free from unknown defects)
  • matches the description the dealer provided or the demonstration model they showed you
  • is fit for any purpose you told the dealer about before buying the car (either expressly or by implication), or any purpose the dealer said it would be fit for
  • will have spare parts and repairs available for a reasonable time

If your vehicle fails to meet a consumer guarantee, you may be entitled to a repair, replacement or refund, which can depend on whether the failure is ‘major’ or ‘minor’. What’s important for you to know is that the car dealer cannot refuse to honour a consumer guarantee, regardless of whether you purchase an extended warranty. 

(Note: extended used-car warranties are all different, but are generally intended to provide extended coverage to the consumer guarantees and any free, mandatory used-car warranties that may apply under state and territory legislation. They may cost you extra and have special restrictions or conditions you need to follow for the cover to apply. It is a good idea to read and understand all terms and conditions before agreeing to buy one, to ensure it is suitable for your needs and budget.)  

Buying a used car from private sellers or at auction

Vehicles bought from a private seller or by way of ‘sale by auction’ are only covered by the guarantees as to title, undisturbed possession and undisclosed securities (meaning the vehicle’s full ownership is transferred to you with no known debts or threat of repossession). 

If you buy a used car from a private seller and later find out there’s a debt owing on it, you might have to repay that loan or risk it being repossessed. Before buying a used car, particularly from a private seller or auctioneer, consider running a check on the Personal Property Securities Register (PPSR) using the car’s Vehicle Identification Number (VIN) or chassis number. The search can be completed online and costs $2 at the time of writing.

Mandatory used-car warranties

In addition to Australian consumer guarantees, in most cases used cars sold throughout Australia are covered by free, mandatory statutory warranties when you buy from a dealer. These are regulated by the states and territories, so the specific conditions of each may vary depending on your location. Statutory warranties tend to be fairly limited in duration. For example in NSW, the dealer guarantee is limited to 5,000km or three months after purchase, whichever occurs first.  

In most areas, these used-car statutory warranties provide coverage for defective vehicles sold by a licensed dealer. These warranties may be excluded in certain circumstances, such as if the car is more than ten years old or has travelled more than 160,000 km. Some states also provide cooling-off periods after you’ve signed a purchase agreement, which may grant you the opportunity to cancel the agreement within a set timeframe under certain conditions. 

As with any laws, the statutory guarantees you’re entitled to in your state may change over time. In September 2019, for instance, Queensland extended its consumer protections for used car buyers by introducing a ‘class B’ statutory warranty to cover cars that are 10 or more years old or that have an odometer reading of 160,000 km or more. 

Specific conditions can apply where vehicles aren’t covered by a statutory warranty, but the dealer or auctioneer must tell you and/or advertise the vehicle for sale as ‘unwarranted’. 

Check out the local laws that apply to you:

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What’s generally covered under a statutory warranty?

Your statutory warranty’s inclusions may vary depending on where you buy your car, but it should ordinarily cover most mechanical defects if a part of your car doesn’t do what it’s supposed to do, or it has worn out so much that it no longer works. 

This isn’t an exhaustive list, but some of the items or 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.

There are also some exceptions, which brings us to our next point. 

What isn’t generally covered under a statutory warranty

Depending on your jurisdiction, the statutory warranty might not cover defects relating to things like:

  • installed radio, tape recorder or CD player
  • tyres (tyres must be roadworthy at the time of sale, however)
  • batteries
  • radiator hose
  • a radio aerial or other aerial
  • spark plugs
  • distributor points
  • wiper rubbers
  • oil or an oil filter
  • a fuel filter or air filter
  • a hose for a heater unit
  • paint work or upholstery that should have been apparent at the time of sale
  • power outlets, including cigarette lighters
  • any additions made after the buyer takes possession.

The warranties also generally don’t cover any defects caused by the buyer’s misuse or negligence, or damage from a car accident. Here’s a quick reference guide provided by the Government of Western Australia, but again, you’ll need to check the state laws that relate to you. 

It can be useful to know your consumer rights to help ensure you’re not unnecessarily out-of- pocket. Because while comprehensive car insurance can cover you for loss or damage caused by a defined event (for example, storm damage or accidents), it’s these consumer laws that can potentially offer you protection for structural defects and mechanical or electrical failures. 

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Protection differences between private sellers and licensed car dealers

Something more to think about is that while buying a used car from a private seller might give you more variety and potentially cheaper deals, you normally don’t have the same legal protection that you do through a licensed dealer. The car likely won’t be covered by a statutory warranty or cooling-off period. 

By law, it’s more difficult to make a private seller responsible for defects if the purchase agreement isn’t in writing and what’s agreed to isn’t clear. So if you encounter any problems, you may need to claim against the seller in the civil courts, which can often be time-consuming and expensive.

To be sure, refer back to your local jurisdiction to learn how you’re covered when buying from a private seller. 

What to do if you are sold a lemon vehicle

Let’s assume you bought your ‘lemon’ vehicle through a licensed dealer. Here’s what to do, (bearing in mind it could be worth seeking independent legal advice if you’re unsure):

  1. Contact the dealer about the defect before the end of the warranty period. It is a good idea to put all your communication in writing.
  2. Mention the Australian Consumer Law and relevant state or territory regulations. 
  3. Deliver the vehicle to the dealer or to a qualified repairer specified by the dealer.
  4. Persevere and be aware it could take a while. 

If the seller isn’t responding or recognising your consumer rights, you can contact the Australian Competition and Consumer Commission (ACCC) or your local state or territory consumer protection agency for further assistance.

Ask the experts before you buy

If you’re in the market for a second-hand car and you want to reduce your risk of buying a lemon, consider comparing car satisfaction ratings first and getting a mechanic to do a full check on your vehicle before crunch time. 

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About Kelly

Kelly is an experienced content writer with qualifications in journalism, communication, and business (HR). She’s long been the go-to writer for accountants and financial planners who need help making complex stuff, like finance, more enjoyable and accessible for their readers using simple, punchy words with zero jargon.

 

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