Here’s our guide to your rights if a car deal goes wrong.
You fell for the dealer’s sales pitch, but it turns out your new wheels don’t “drive like a dream” after all. If you're sold a lemon, you don’t have to suck it up. You’ve got rights under the Consumer Guarantees Act (CGA) and Fair Trading Act (FTA).
The CGA requires goods to be of acceptable quality, to be fit for purpose and to match their description. It applies to new and second-hand cars.
Acceptable quality depends on what a reasonable consumer would expect, given the age and type of vehicle, the price paid and any claims made by the dealer.
In practice, you’d expect a $50,000 car fresh from the factory to give you trouble-free motoring for much longer than a $5000 vehicle that’s been around the clock. But that doesn’t mean a dealer can sell you a car they know is a dud. You wouldn’t fork out $5000 for a vehicle that you knew would break down the second it was driven off the lot.
Dealers must also comply with the FTA, which means they can’t make false or misleading claims about a vehicle. The dealer can’t tell you the car is in “mint condition” but sell you a pup. Any trader breaching the act can be fined up to $600,000.
If your new wheels don’t measure up to the CGA’s requirements, the first thing to do is ask the dealer to sort it out.
When the problem is minor, the dealer can opt to fix it, replace the car or give you a refund. If the dealer can’t or won’t fix it, or the problem is major, you can request either a replacement or your money back. You can also get the repairs done elsewhere and claim the costs back from the dealer.
In addition, the CGA gives you the right to claim consequential damages – that’s any reasonably foreseeable costs you’ve incurred as a result of the vehicle’s failure. For example, if you needed to hire a car because yours was off the road due to the fault, you can request the dealer reimburse you.
If the dealer’s playing hardball, you can get an independent inspection to support your case. Put your complaint in writing, telling the dealer what you expect it to do. If you’re rejecting the car, set out the reasons why.
Still no joy? You can take the case to the Motor Vehicle Disputes Tribunal (MVDT).
The MVDT is a low-cost avenue for resolving complaints. It costs $50 to lodge a claim and the tribunal can hear disputes involving amounts of up to $100,000. Last year, about 400 cases were lodged in the tribunal.
You need to provide evidence that supports your claim and shows you gave the dealer a chance to fix the problem. Your evidence is likely to include:
You should include a statement of how you want the dealer to fix things. The MVDT will notify the dealer of your claim and set a hearing date. It can also order its own expert report on the vehicle.
If you’ve bought the vehicle with a loan arranged by the dealer and you’re rejecting the car under the CGA, the dealer can be held liable for the loan. The dealer can also be held liable if they’ve misled or deceived you and you’ve been left out of pocket.
Anyone who’s sold more than 6 cars or imported more than 3 vehicles in a year must be registered as a motor vehicle trader. Failure to register can result in a fine of up to $200,000. You can check the Motor Vehicle Traders Register to find out if a dealer is registered or banned.
Buy a vehicle from someone you meet in the pub or a private seller on Trade Me and you’re not protected by the CGA or FTA. You’ll have to rely on the more limited protections available under the Contract and Commercial Law Act.
You may be able to rely on the act if a seller misrepresents the car to you and you’re persuaded to buy it based on that misrepresentation. You need to show the seller’s claim was a major factor in your decision to buy.
If the seller’s misrepresentation leaves you seriously out of pocket, you may be able to cancel the deal.
The act also gives you the right to claim damages, such as the cost of any repairs you’ve had to make. But there are limits. You have a duty to minimise your losses – so your claim's not likely to succeed if you've continued to repair a vehicle with major faults.
You may also have some comeback if you've bought a car that doesn't match its description. The act says where goods are "sold by description" then they must correspond with that description. If they don't, you can reject them.
If you think a private seller has misled you, you can take them to the Disputes Tribunal. The hitch is sellers can contract out of the provisions of this act – and if they do, these rights won't apply.
There are also limits on the amount you can claim at the tribunal. It can only hear claims up to $15,000 (or $20,000 provided both parties agree). Fees are staggered, based on the amount of money you’re claiming for:
So if you’ve forked out $50,000 buying a motorhome from a private seller, the tribunal isn’t an option, unless you’re prepared to limit your claim. You’ll have to go to the District Court instead.
A dealer is required to attach to every motor vehicle displayed for sale a “consumer information notice” (CIN). There must be a link to the CIN if a trader is selling used cars on the internet.
The information that must be disclosed in the CIN includes:
If you buy the car, you must be given a copy of the CIN.
If a vehicle is displayed without a CIN, or the information on the CIN is misleading, you can complain to the Commerce Commission. The commission can prosecute for breaches of the Fair Trading Act. If you buy the vehicle and then discover you were misled you may be able to take action yourself under the Fair Trading Act.
If you don’t have the readies for your new wheels, the dealer will be quick to offer finance. But you may be able to get a better deal with a personal loan from your bank, or even add the loan to your mortgage.
It’s not only the interest rate you need to consider, but also the fees that come with the loan. Look at the total amount you’ll have to pay for the vehicle. Lenders must make their rates and terms publicly available to help consumers compare options.
When taking out a loan, the Credit Contracts and Consumer Finance Act (CCCFA) gives you a cooling-off period of 5 working days. If you haven’t taken possession of the car, you can cancel both the loan and the agreement to purchase the car. However, if you’ve already driven the car off the lot, you’ll still have to find the money to pay the dealer for the vehicle.
The CCCFA obliges all lenders – including car finance companies – to lend responsibly. They must help you understand the costs of the loan and shouldn’t be throwing money at you that you can’t afford to repay.
If you do get into financial difficulties, you can make a hardship application to the lender, asking to postpone payments for a while or extend the term of the loan and reduce your regular payments.
If the lender unreasonably refuses your hardship application – or isn’t meeting its responsible lending obligations – you don’t have to put up with it. All lenders must belong to 1 of 4 dispute resolution schemes. You can make a complaint to the relevant scheme if the lender’s not playing by the rules.
Let the Commerce Commission know too. It can prosecute companies for breaches of the CCCFA.
In October last year, Chelsea Slattery bought a 2005 Mazda from dealer Fairgocars. She financed the $10,900 car with a loan from Go Car Finance, arranged for her by the dealer.
Before she bought the Mazda, she noticed the vehicle’s airbag light was flashing and asked the dealer to fix it but the repair didn’t solve the problem and the fault returned. Ms Slattery took the vehicle back at least 3 more times to have it fixed but without success.
Ms Slattery told Fairgocars she was rejecting the car and stopped making loan payments. Go Car Finance subsequently repossessed the vehicle.
When the case went to the Motor Vehicle Disputes Tribunal, its expert assessor advised there was a fault causing the airbag light to flash. Whenever the light flashed, the car’s airbags and seatbelt pre-tensioners were disabled – a major safety issue.
The tribunal adjudicator found the fault meant the car wasn’t of acceptable quality and Ms Slattery was entitled to reject it. As she’d bought the car on finance arranged by Fairgocars, the dealer was held liable for her obligations under the loan contract.
Fairgocars had to refund Ms Slattery the money she’d paid towards the loan, as well as the fee she paid to have the vehicle assessed.
The adjudicator also recommended Go Car Finance reconsider its repossession practices, criticising it for repossessing the vehicle when there was an ongoing dispute.