Consumer Guarantees and Used Cars

(This is not legal advice.  There are no written reasons for the VCAT decision so I am relying on notes I took during the hearing).

A Victorian consumer recently received a full refund of the price he paid for a 4-year-old car which developed a serious problem 12 months after purchase.

This outcome is not very common, not least because there are often evidentiary issues in these cases.  However, it illustrates how the right to a refund or repair of faulty goods clearly extends to used cars – and can apply years after the end of any manufacturer’s warranty.

G bought the used Volkswagen Golf from a VW dealer in February 2014 for $14,500.  He had the car just under a year when it developed a serious problem, requiring replacement of the engine.  The quote for repair was $15,540.  Volkswagen Australia offered to pay half the cost of the part, as a ‘good will’ gesture.  However, this would have left G with a bill of $9,200.

G took his case against the VW dealer to the Victorian Civil and Administrative Tribunal (VCAT).

Consumer Guarantees

When anyone buys goods or services, those goods or services must meet certain standards called ‘guarantees’ under the Australian Consumer Law.

Both manufactures and sellers are responsible for consumer guarantees. However, consumers often believe (wrongly) that any claim they have for faulty goods must be made against the manufacturer.

It is often easier and preferable to approach sellers when claiming consumer guarantees, particularly because where there is a major fault, the seller will be obliged to provide a refund or replacement. The seller can’t refuse to honour the guarantee or insist that the consumer claim from the manufacturer. In addition to consumer guarantees, a manufacturer may provide a warranty that provides additional coverage, however in some cases (and this case is a good example) the manufacturer will offer less than the consumer may receive by claiming the consumer guarantee from the seller.

Consumers can also be confused by the limitations on ‘extended warranties’ offered by sellers, which can be virtually useless and can’t limit the consumer’s ‘guarantee’ rights.

The seller didn’t mislead G by telling him to claim from the manufacturer (although some sellers do) but the seller ignored G’s emails about the fault and VW Australia offered to contribute to repairs.  This could have led G to believe that it was VW Australia – and not the car dealer – who was responsible.

The hearing

G was probably lucky.  He had not obtained an independent expert report (which is strongly advised in these cases).  However, the VCAT referee appeared to have significant experience in engineering and mechanics, and based on the email from the repairer who quoted on the required repair, the referee determined that the failure shouldn’t have occurred in a car of that age (just under 5 years) and determined that this was a “major failure” pursuant to the Australian Consumer Law, noting that it was probably a fault in the vehicle at the time of manufacture (and therefore at the time it was sold by the second hand dealer).

In awarding redress, VCAT usually consider the use a consumer has had of a vehicle and deducts that from any refund.  However, G was able to show that he had spent significant amounts of money on hire cars and other expenses, so the order was that the dealer pay G the purchase price of $14,500 and that G transfer title of the unrepaired vehicle to the dealer.

This is not the first case where a consumer has won a used car case in VCAT based on a breach of consumer guarantees

However, in this earlier case, the outcome was not as positive as in G’s case and the consumer appealed the amount of compensation ordered.

Consumer Action Law Centre believes that the consumer guarantees are inadequate in some cases where a vehicle has ongoing problems, and this is outlined in their submission on lemon laws.

Read about G’s dodgy “warranty” that would have covered 5 percent of the cost of repairs if he had complied with all the conditions.

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