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Buying a Used Car? Here’s What You Need to Know About Australia’s ‘Lemon Laws’

March 31, 2020 8 minute read
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Daniel Wessels

Buying a Used Car? Here’s What You Need to Know About Australia’s ‘Lemon Laws’

What is a lemon?

What is a lemon law and what does it have to do with buying a used car? If you’re asking yourself this question, then you’ve come to the right place. ‘Lemon laws’ are laws designed to protect people who have bought faulty or defective vehicles. The ‘lemon’ part refers to the vehicle.

No one wants to buy a lemon car, but it could happen. If you’re unlucky and end up with a lemon, you should be aware of the laws protecting you. You should also be aware of your rights under these laws.

What are ‘lemon laws’?

Currently, Australia does not have a national law that protects car buyers from faulty vehicles. Each state has different protections, so it would be a good idea to check the specific laws in your area before buying a used car. 

For example, Queensland was the first state in Australia to introduce laws protecting buyers if they purchase a lemon vehicle. The government rolled out these loans in September 2019, and they were still in effect at the time of writing. Now, the Queensland Civil and Administrative Tribunal (also known as the small claims court) can hear vehicle disputes up to $100,000. The previous limit was $25,000, which didn’t allow for as many car claims to be heard.

However, if you’re not in Queensland, there are two pieces of legislation that might be available to you right now. These are the protections under Australian Consumer Law and used-car statutory warranties. 

Australian Consumer Law: Used Cars

Australian Consumer Law provides guarantees that when you purchase a product or service, it will work the way it said it was going to work. Both new and used cars are protected under these laws. If you buy a used car from a licensed dealer, you will automatically receive a number of guarantees. These include the car:

  • is of acceptable quality;
  • matches the description that the dealer provided or that the demonstration model indicated;
  • is fit for any purpose which it was described to be fit for; and
  • will come with all the necessary spare parts and repairs available for a reasonable time.

If anything from that list becomes a major issue for your used car, you may be able to get your car repaired, replaced or refunded. For failures to be classed as ‘major’, it must be severe enough that it would have stopped you from purchasing the vehicle, had you known about it. This may include that the car is:

  • not of acceptable quality;
  • significantly different to how it was described;
  • substantially unfit for the purpose that it was said to be fit for; and
  • unsafe for consumers.

If the issue with the car is only ‘minor’, you may not be up for any compensation. The dealer may, however, offer to repair the defect. If the defect is major, the dealer can’t refuse to honour your rights under the law.

Used-car statutory warranties

Dealers typically offer used-car statutory warranties when you buy a used car. So, when you buy a second-hand car, read the sale contract carefully to ensure it is covered by this warranty.

These warranties are regulated per state and territory so may differ depending on where you purchase your car. For example, in New South Wales, the warranties will only provide compensation if you have driven the car for less than 5,000 kilometres or you’ve had the car for less than three months, whichever comes first. This only applies if the car has driven less than 160,000 kilometres previously and was less than 10 years old. Conversely, Queensland has recently introduced extended warranties for cars older than 10 years or with more than $160,000 kilometres.

Things that are usually covered in a statutory warranty may include:

  • Brakes;
  • Speedometer;
  • Windscreen wipers; 
  • Heater, demister and fan; 
  • Structural rust to the frame;
  • Radiator leaks, core damage and blockages; and
  • Engine defects and serious oil leakages.

Some states might allow for ‘cooling-off periods’ in car sale contracts. This means that you may have a period of time after you purchase the car in which to cancel the sale. There will likely be certain conditions to this clause which will differ per contract or per state or territory. Carefully read the contract if you are thinking about cancelling a sale agreement.

Be aware that warranties will not cover defects caused by you, the new purchaser and owner. Car insurance is needed to cover any costs associated with the owner’s negligence or misuse.

Dealers may sometimes (though rarely) sell cars without a warranty. They must specifically advertise that the car is ‘unwarranted’. 

4 things to check before buying a used car

  1. Do a budget
  2. Research the car
  3. Arrange an inspection
  4. Check the car’s history

You may know all about lemon laws and how they can help you if you purchase a lemon car. However, knowing how to avoid buying a lemon car in the first place is important. There are laws that could protect you, but ideally, they’d be the last resort. We’ve got a few tips and tricks that you can use when purchasing a used car to avoid ending up with a lemon.

#1 Do A Budget

Your budget may determine whether you buy a car from a licensed dealer or a private seller. Dealers are generally more expensive, but they will usually provide statutory warranties as we discussed above! They can guarantee that there’s no debt owing to the car, and you may be able to trade in your car. Private sellers, on the other hand, are generally cheaper. However, you may not have as much protection if the car is a lemon.

#2 Research The Car

It sounds obvious, we know, but doing your research beforehand will give you the best idea on which brands are reliable and which to avoid. If you’re buying from a private seller, it will give you an indication of how much you should be paying. This will ensure you don’t get persuaded to spend more than the car is worth.

#3 Arrange An Inspection

Dealers should allow for this, but if you’re buying through a private seller it’s smart to organise an inspection. This way, you can inspect the car for any obvious faults or defects. Also, if the seller is reluctant to let you inspect the car, they may be hiding something. Here are a few things to look for during an inspection: 

Exterior DamageAlways organise inspections during the day so you can see the car in full light (rather than at night). Check for sun damage, scratches, dents, rust, tyre tread and other exterior defects.
Interior DamageCheck that the seats aren’t stained, the buttons light up appropriately, the speedometer is correct, all seatbelts are working etc.
EngineLook under the bonnet for oil leaks. Start the engine up to make sure it does this with no problems.
GadgetsCheck that the indicators work, all brake lights and headlights work,

During the inspection, ask if you can take the car for a test drive. A lot of issues may not reveal themselves until you’re on the road, such as squeaky brakes. Check that the car doesn’t make any irregular noises.

#4 Check the car’s history

Don’t buy a car without checking its history. You will want to make sure that the vehicle is not stolen, or there is an outstanding debt owing on it. Consider checking the car’s Vehicle Identification Number (VIN) on the Personal Property Securities Register (PPSR) to find out its history. There will be a small fee for this but could save you a lot of money in the future.

I think I’ve bought a lemon, what do I do?

Sometimes, it’s hard to tell if you’ve bought a lemon car. You often won’t know if your car is a lemon when you buy it, especially if you buy from a licensed dealer. However, this can happen.

If you think you’ve bought a lemon car from a licensed dealer, don’t stress. Consider the follow the below steps:

  1. Contact the dealer who sold you the car before the end of the warranty period. Also, contact the Australian head office of the car company.
  2. When speaking to the dealer and the company, mention the Australian Consumer Law guarantees, and the relevant laws regulating your state or territory.
  3. Clearly identify your concern that you have bought a lemon car.
  4. Put all communications in writing as evidence that you reported your concern.

The process may take time, so it may require some perseverance on your behalf. If the dealer that sold you the car is not responding or cooperating, you can contact the Australian Competition and Consumer Commission (ACCC) or your local state or territory consumer protection agency for further assistance.

Jacaranda Finance are the experts on car finance

So, if you’re in the market for a used car, why not contact the experts? Jacaranda Finance offers car loans. Our loans are between $5,000 and $35,000, with a repayment term between 1 and 5 years and bad credit car loan applications are welcome!

Jacaranda’s car loans could be the solution you need. It’s so easy to apply for a car loan with Jacaranda Finance, as the application process is 100% online. So, what are you waiting for? Click here to buy your dream car today (not a lemon)!


Daniel Wessels Avatar

Authoritative Source: Daniel Wessels

Young entrepreneur Daniel Wessels is the CEO and Founder of Jacaranda Finance. Although only in his early thirties, Wessels’ determination and adaptability has led him to successfully pioneer a range of other enterprises both here and abroad.

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