Make sure your dream car isn’t a lemon

Just when you thought the price of everything was going up, prices of most used cars are going down. It’s thanks to the renewed supply of new vehicles and high interest rates, which have dampened demand for used cars. Before you buy a used car, do your homework. Make sure nobody sells you a lemon.

What is a lemon?

In Australia, there is no legal definition of a lemon and no so-called “lemon laws”. However, everyone knows what it is when their dream car won’t work.

• Consumer Action Law Centre (CALC) says it’s a vehicle that: “has been repaired at least three times by the manufacturer or importer and the vehicle still has a defect, or if the vehicle is out of service for 20 or more days in total due to a defect”.
• Australian Consumer Law says a major failure to comply with consumer guarantees is when: “a reasonable consumer would not have bought the motor vehicle if they had known about the full extent of the problem”.

In fact, a 2016 report by Choice found two thirds of Australians had problems with their new cars in the first 5 years and 14% had major problems.

But what if you bought a used car? Do you get any protection against buying a lemon?

If you buy from a dealer

There are 2 types of protection when buying a used car from a dealer: consumer law and statutory warranties.
 
Consumer law: This applies for an unspecified but “reasonable time” and guarantees the vehicle you buy:

• is of acceptable quality
• matches the description provided
• is fit for any purpose expressed
• has spare parts and repairs available for a reasonable time.

Statutory warranties: In NSW, a statutory warranty lasts 3 months or 5,000 kms and covers cars under 10 years old with less than 160,000 kms on the clock. They cover faults with the:

• brakes
• engine defects and serious oil leakage
• heater, demister and fan
• radiator leaks, core damage and blockages
• serious structural rust in the subframe
• speedometer
• windscreen wipers and washers (not blades).

Note, manufacturer warranties are a marketing tool and separate from statutory warranties.

The ACCC found in 2017 that commercial arrangements between manufacturers and dealers tended to focus on warranty rights rather than consumer guarantees. This was limiting the ability of dealers to provide a refund, replacement or repair.

If you buy from a private individual

The story is very different if you buy from a private individual. The car is unlikely to be covered by a statutory warranty. In this case, the only guarantees are:

• Title
• Undisturbed possession
• Undisclosed securities (no known debts or threat of repossession).

Before buying a used car, you should always check whether there it has been written off or stolen or whether there is a loan still on it. Use the Personal Property Securities Register (PPSR) and put in the VIN or chassis number. It costs only $2 online or $7 for help on the phone. Finally, you can’t make the private seller responsible for any defects.

To reduce your risk of buying a lemon and before you put any money down, get a reliable mechanic to do a full check of the vehicle.

What to do if you buy a lemon

If you bought a lemon from a licensed dealer, there are some steps you can take:

1. Tell the dealer in writing before the end of the warranty period.
2. Mention Australian Consumer Law and statutory warranty regulations in NSW. 
3. Take the vehicle back to the dealer or to their qualified repairer.
4. Contact the Australian Competition and Consumer Commission (ACCC)  if you need more help.

See: Lemon laws would have more juice.

Are you considering buying a used car now?

Used car prices have fallen about 15% in the past 3 months, except for more popular near-new cars, such as the LandCruiser 70 Series or Ranger Raptor. While used car prices are still higher than they were before Covid, Moody’s says prices could fall another 10% in 2023. For more, see Is it better to buy a new or used car in 2023?