Last updated 9 August 2016
When buying a used car from a motor dealer, the Motor Dealers and Chattel Auctioneers Act 2014 (Qld) (Motor Dealers Act) and the Motor Dealers and Chattel Auctioneers Regulation 2014 (Qld) (Motor Dealers Regulation) provide additional consumer protection. Some protections do not apply to new cars.
Special rights and obligations provided by the Act
The Motor Dealers Act provides for:
- a cooling-off period when buying a used car (s 99)
- written contracts of sale (s 118)
- statutory warranties (s 115, sch 1).
Documents a motor dealer is required to provide
According to the Motor Dealers Act, a motor dealer is required to provide the following documents:
- a copy of the signed contract immediately after signing (s 118)
- a statement about the previous ownership of the vehicle (reg 8 Motor Dealers Regulation)
- a notice about the car’s statutory warranty if any
- a cooling-off clause in the contract
- a security interest certificate on the day the ownership of the car transfers, showing that no one else has a registered financial interest in the car (bill of sale or mortgage)
- a statement about the odometer reading, previous ownership and other particulars (s 74, reg 8 Motor Dealers Regulation)
- a safety certificate (previously known as roadworthy certificate)
- documents about the loan if finance is provided through or by the motor dealer (see the chapter on Consumer Credit and Banking).
If the buyer is not given notice of the cooling-off period or the statement identifying the vehicle, then the buyer can avoid the contract up to seven days after the day the car passes legally to the buyer (s 104 Motor Dealers Act)
Other failures to deliver required documents mean the motor vehicle dealer has committed an offence, and it may also be evidence that the contract is not binding.
Complaints about motor dealers should go to the Office of Fair Trading.
Avoiding the contract during the cooling-off period
A cooling-off period of roughly one business day is the time allowed to a buyer to cancel a contract without reason and without liability for damages for breaching the contract (s 110 Motor Dealers Act).
The exact time of the cooling-off period needs to be calculated using the provisions of s 99 of the Motor Dealers Act.
A part of the deposit can be retained by the motor dealer if the contract is avoided during the cooling-off period. The current maximum amount is $100.
The cooling-off period does not apply if the buyer takes possession of the car before the expiry of the cooling-off period, unless the purpose of taking the car is to go for a test drive or undertake a vehicle inspection.
A motor dealer (unless the used vehicle is bought on consignment or at auction) must give a notice to the consumer of their right to cancel the contract during the cooling-off period.
When notice of the cooling-off period is not provided, the consumer has seven days to avoid the contract (s 105 Motor Dealers Act).
Cancelling a binding used-car contract
If a binding contract is cancelled, the used-car dealer is entitled to damages for breach of the contract. The standard contract used in Queensland has a term that provides that a pre-estimate of a car dealer’s loss when a binding contract is cancelled is 10 to 15% of the purchase price of the vehicle.
Consumers can challenge the amount of the damages claimed by the dealer. If the dealer sells the car to another purchaser within a short period of time for the same amount, then the consumer can argue that they should only pay the actual loss suffered.
The contract may include the words ‘subject to’. This means that something must happen before the contract is binding. The clause may also require that the happening of an event be satisfactory to the purchaser and have words such as ‘subject to being satisfactory to the purchaser’.
If the contract is subject to finance, then it is merely an offer to purchase until finance has been approved. If a mechanical check or finance approval is unsatisfactory to the purchaser, then the purchaser can end the contract in the time period specified in the contract by written notice, stating that the result from the check or application for finance was not satisfactory to the purchaser. The purchaser does not have to show that a reasonable person would not have been satisfied, only that they were not satisfied. The purchaser cannot cancel the contract if they have not undertaken a check or made an application for finance.
Sometimes the contract might state a particular financier’s name.
It is possible to argue that the finance condition is too vague and uncertain. For example, if the clause or term in the contract does not state the amount to be financed, the date by which finance should be approved or the type of finance, then it can be argued that the contract term is so vague that it means the contract cannot be binding. Even where the dealer obtains finance on the purchaser’s behalf, it is possible to have the lender withdraw the finance offer if further information about the purchaser’s capacity to pay is given to the lender.
When there is no written clause about finance, but the dealer knew that the buyer could not complete the contract without obtaining finance, it may be possible to argue that the contract contained an implied term that it was subject to finance. In that case, if the purchaser is unable to obtain finance, they can still cancel the contract without being liable to pay damages on the basis that it was not binding until they obtained finance.
Purchasers should seek further advice if they intend to rely on an implied term or a condition precedent.
Problems with the car
There is a period (statutory warranty) during which a purchaser can return a used car for repairs if it has a defect, unless the purchaser bought the car privately, the car was sold unregistered, or it is a caravan, motorcycle or commercial vehicle. Schedule 1 of the Motor Dealers Act includes all warranty provisions unless indicated otherwise.
A defect is part of a vehicle that cannot be reasonably relied upon or is not performing its intended function. Defects in tyres, batteries, lights, radiator hoses, airbags and sound/music systems are not covered by the statutory warranty (reg 47 Motor Dealers Regulation). The government can regulate to extend the list of items not covered by the warranty at any time. The warranty does not cover damage to the car that occurred after the sale by the purchaser, or paintwork and upholstery problems that the purchaser should have been able to see when they bought the car.
Only used cars that have travelled less than 160 000 km and that are less than 10 years old have a warranty. The warranty is for three months or 5000 km, whichever occurs sooner.
If the car has a defect covered by warranty, the buyer must give the dealer a defect notice and deliver the car during the warranty period to the dealer or his nominated repairer.
The buyer should establish whether the dealer is prepared to repair the vehicle under warranty before they return the car for repairs. The dealer is required to give written advice as to their acceptance or rejection of the claim. Not responding to the claim is similar to saying that they accept the claim for warranty repairs.
The dealer has five days to advise if the defect is covered by the warranty. If the dealer accepts that the defect is covered, the dealer has 14 days to repair.
If the dealer claims that the defect is not covered by the warranty, the purchaser can apply to QCAT to obtain an order that the defects be repaired.
If the dealer refuses to comply with the order of the tribunal to fix the defects or does not fix them to a reasonable standard, the Office of Fair Trading may take disciplinary action against the motor dealer in QCAT. This can lead to a cancellation of the motor dealer’s licence.
Was the car of acceptable quality?
Even if the statutory warranty does not apply, the warranties contained in the Australian Consumer Law (ACL) may also apply including the warranty that the car is of acceptable quality. This means that the car must be of sufficient quality and fit for the purpose for which it was sold, having regard to the price.
In practice, the purchaser would need to show that at the date they bought the car there was a roadworthy defect. This means that the purchaser would need an independent mechanical inspection stating that the problem existed when the car was purchased.
It is very hard to get an independent written report unless it is obtained reasonably quickly after the sale.
If the purchaser can show the defect did exist on the day the car became legally theirs, then they might have a right to end the contract and return the car.
The purchaser would need to act quickly and make a complaint in writing to the dealer. If the dispute continues, the purchaser may need to take the matter to court. If the purchaser is claiming less than $25 000, then the purchaser will be able to take the matter to QCAT.
Sections 20 to 22 of the ACL aim to protect consumers against unconscionable conduct when the purchase is for personal, domestic or household use.
The time limit for making a claim under the ACL is six years after the conduct (s 236).
In deciding if conduct is unconscionable, the court will look at:
- the relative strengths and bargaining positions between the parties
- whether the consumer was required to comply with conditions not reasonably necessary for the protection of the legitimate interests of the dealer
- whether the consumer understood the documents
- whether undue influence, pressure or unfair tactics were used by the dealer
- the cost of identical or equivalent goods from another dealer.
The court can cancel a contract because of unconscionable or misleading and deceptive conduct (s 18).
The dealer offers to swap the car for another vehicle
Consumers are not obliged to accept a different vehicle from the one they originally inspected. If the consumer agrees to accept another vehicle, the dealer is obliged to write up a new contract or vary the original contract. The consumer can argue that the dealer has waived the right to insist on the original contract by offering the consumer another car.
Waiver is where one party, by their conduct:
- leads another to believe that the rights arising under the contract will not be insisted upon
- intends that the other should act on that belief and the other party does act on the belief.
The first party will not afterwards be allowed to insist on strict legal rights under the contract when it would be unfair to do so. This is the legal concept of waiver. The result of waiver may lead to a dealer losing their rights to insist that the contract is binding.