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10 July 2019

2 Cheap Cars cops $438,000 fine

Used car dealer fined over “blatantly untrue” document and “devious” advertising.

Car dealer 2 Cheap Cars has been fined $438,000 for misleading advertising and a warranty waiver branded “blatantly untrue and misleading” by a judge.

Between January 2014 and December 2017, 2 Cheap Cars routinely asked customers to sign a warranty waiver if they didn’t purchase an extended warranty when they bought a car from the trader.

This waiver included terms such as “the vehicle you are purchasing does not include a warranty of any kind” and created the misleading impression customers would have no rights unless they paid extra for an extended warranty.

However, car buyers already had protection under the Consumer Guarantees Act (CGA), which requires goods to be of acceptable quality. If they’re not, the seller must sort it out. Traders can’t contract out of the act.

Judge Robert Ronayne said the waiver was “blatantly untrue and misleading” and “must have been designed to encourage (unlawfully) the purchase of insurance product”.

The Commerce Commission estimated more than 20,000 warranty waivers were signed during the period of offending. 2 Cheap Cars stopped using the waivers in December 2017 after it was told about the commission’s investigation.

Commerce Commission Chair Anna Rawlings said the dealer “misrepresented consumers’ rights”.

“Conduct such as this puts pressure on customers to buy an extended warranty and deters them from returning to the seller for help if something goes wrong, even though they may have rights under the CGA,” she said.

2 Cheap Cars was also sentenced for misleading advertising.

Ads the dealer ran from 30 September to 1 October 2017 included claims such as “2 Cheap Cars is in hot water, it must liquidate immediately” and “A massive price drop this weekend!”

However, most of the 710 vehicles it had for sale weren’t discounted or only had prices reduced by as little as $5. The dealer wasn’t in, nor going into, liquidation.

Judge Ronayne described this advertising as “a complete departure from the truth”.

In January 2017, the dealer also ran newspaper ads with the phrase “84% off”. However, this was only a discount off a $300 GrabOne voucher that could be used towards purchasing a vehicle.

Judge Ronayne said the dealer’s conduct was “misleading and careless and, when viewed as a complete advertisement, tantamount to devious”.

2 Cheap Cars had earlier pleaded guilty to 10 charges of breaching the Fair Trading Act.

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