Lemon Laws for New and Used Cars
When purchasing a car, you expect it to be reliable and fit for purpose. However, sometimes buyers end up with a “lemon”—a vehicle plagued with defects or malfunctions. In Australia, while there isn’t a specific “lemon law” like those in the United States, consumers are protected by a combination of laws and statutory warranties that ensure recourse when things go wrong. Here, we’ll explore what a lemon car is, how Australian Consumer Law (ACL) protects buyers of new and used cars, and what steps you can take if you believe you’ve purchased a lemon.
What is a Lemon Car?
Australia has no legal definition for a “lemon” car. However, the term generally refers to a vehicle with a significant defect or recurring issues affecting its performance, safety, or usability. These defects often prevent the car from meeting its intended purpose or the buyer’s reasonable expectations. A lemon car can be either new or used, and the issues may result from a manufacturing fault or substandard maintenance in the case of used vehicles.
Consumer Protection and Australian Consumer Law
Though there is no specific lemon law, Australian Consumer Law (ACL) offers robust protections to buyers of both new and used vehicles through consumer guarantees. These guarantees apply to all products sold in Australia, including cars, and provide specific rights to buyers:
- Acceptable Quality: A vehicle must be safe, durable, and free from defects.
- Fit for Purpose: The car must be suitable for any specific purpose made known to the seller.
- Match Description: The vehicle must match any descriptions provided, including those in advertising or during a demonstration.
- Availability of Spare Parts and Repair Facilities: The manufacturer or dealer must provide access to necessary parts and repair services for a reasonable time after purchase.
These guarantees apply regardless of the type of warranty the car comes with. Even if your vehicle’s manufacturer warranty has expired, Australian Consumer Law may still cover you if the car does not meet the guarantees listed above.
Manufacturer's Warranty
All new cars sold in Australia come with a manufacturer’s warranty, typically covering faults or defects for a specified period. This warranty period varies between manufacturers, but many offer warranties that last between three to five years. Some brands even offer longer warranties, such as seven years. These warranties usually cover the cost of repairs for manufacturing defects.
Many dealers also offer extended warranties, including specific conditions and required servicing at designated workshops. It’s important to read the terms of these warranties carefully, as they often limit your choice of mechanics and require strict adherence to service schedules.
Statutory Warranty for Used Cars
In addition to the protections provided by Australian Consumer Law, buyers of used cars in Victoria benefit from a statutory warranty if certain conditions are met. This statutory warranty applies to used vehicles that are:
- Less than 10 years old, and
- Have travelled fewer than 160,000 kilometres.
The warranty lasts for three months or 5,000 kilometres (whichever comes first) and obliges the dealer to repair any defects that affect the car’s reasonable condition for its age. However, the dealer is not required to cover repairs for any defects listed on a defect notice at the time of purchase.
This statutory warranty only applies to cars purchased from a licensed motor car trader. It does not apply to private sales or vehicles bought at auctions. Buyers purchasing from these sources should take additional precautions, such as conducting a Vehicle Identification Number (VIN) check through the Personal Property Securities Register (PPSR) to ensure the car is not encumbered or stolen.
What to Do If You Buy a Lemon Car
If you discover that your vehicle has a persistent fault and does not meet the consumer guarantees, the business that sold you the car must offer a remedy. Depending on the nature of the fault, you may be entitled to a repair, replacement, or refund.
Minor Defects
If the issue is deemed minor, the seller can repair the vehicle. This repair should be carried out free of charge and within a reasonable time frame. If the defect is minor and the seller offers to fix it, you are required to accept the repair.
Minor Defects
If the defect is major—meaning it cannot be fixed or significantly impacts the car’s performance—you have the right to choose between:
- A repair: The dealer must fix the car at no cost to you.
- A replacement: You may request a replacement vehicle of a similar type and value.
- A refund: The dealer may offer you a full refund, which should match the amount you paid using the same payment method.
A major defect might include serious safety issues, mechanical failure, or repeated breakdowns that make the vehicle unfit for use.
Dealer Responsibilities
Importantly, if you experience issues with your car, the dealer cannot simply direct you to the manufacturer for a solution. It is the seller’s responsibility to provide a remedy under consumer guarantees. Documenting the problem in writing and providing evidence, such as repair invoices or mechanic reports, can strengthen your case when seeking a solution from the dealer.
What to Do If the Dealer Doesn’t Resolve the Issue
If the dealer fails to repair or replace the vehicle, or refuses to acknowledge your consumer rights, you have several options for escalation:
Consumer Affairs Victoria (CAV)
You can lodge a complaint with Consumer Affairs Victoria (CAV) after attempting to resolve the issue with the dealer. CAV can help mediate disputes between buyers and dealers and guide you through the process of enforcing your rights under consumer law.
Motor Car Traders Guarantee Fund
For used car buyers, if a trader refuses to repair a fault covered under the statutory warranty, you can make a claim to the Motor Car Traders Guarantee Fund. The fund can compensate buyers for repairs up to $40,000. However, to qualify, the vehicle must be less than 10 years old, have travelled fewer than 160,000 kilometres, and the fault must have occurred within three months of purchase or within 5,000 kilometres of driving.
Victorian Civil and Administrative Tribunal (VCAT)
If mediation efforts fail, you can take your case to the Victorian Civil and Administrative Tribunal (VCAT). VCAT can hear cases involving vehicle purchases under $40,000 and may issue binding orders to resolve disputes. You may seek compensation or request the cancellation of the sale if you prove that the vehicle is faulty.
Australian Competition and Consumer Commission (ACCC)
While the Australian Competition and Consumer Commission (ACCC) does not handle individual complaints, it collects data on consumer issues and may take action against businesses that violate consumer law. If a large number of complaints are filed against a business, the ACCC may launch an investigation into its practices.
What If Your Mechanic Doesn’t Fix the Car Properly?
If your car is out of warranty and a mechanic performs unsatisfactory repairs, you are still protected by the Australian Consumer Law. Mechanics are considered service providers whose work must meet a reasonable standard. If the repairs are faulty, you can request they be fixed again at no cost. If the issue is unresolved, you can file a complaint with CAV or apply to VCAT for compensation.
Even without a specific lemon law in Australia, consumers have significant protections when purchasing a faulty vehicle, whether new or used. If you believe you have bought a lemon, your first step is to contact the dealer and, if necessary, escalate the issue through the appropriate legal channels. Ensuring you understand your rights under Australian Consumer Law can help you navigate the process and get the remedy you deserve.
Want to avoid all the headaches of buying a new or used car? Talk to a professional and get your car properly assessed.
