Commissioner's blog: Driving down the cost to cancel car contracts
Anyone who’s tried to cancel a contract to buy a new or used car may recall being slugged with a fee from the dealer for pulling out of the deal.
Known as ‘pre-estimated liquidated damages’, the fee is supposed to be a true reflection of actual costs incurred by the dealership as a result of the transaction falling through, such as vehicle licensing costs, special accessories that may have been fitted and demonstrable administration costs.
Unfortunately Consumer Protection has been aware that some dealers have been using the maximum rate as an automatic default amount, which is an unacceptable practice that has prompted the rate to be reduced.
From 1 January 2022, the maximum amount motor vehicle dealers in WA can charge a consumer who cancels a purchase contract will be reduced from 15 to five per cent of the contract’s value.
The rate reduction comes as new car buyers face longer wait times due to increased demand and global production shortages.
Consumers waiting on new cars to be delivered should know a dealer has up to three months to deliver a vehicle into their possession, unless the contract states otherwise.
If the new vehicle fails to materialise within this timeframe, a buyer would be within their rights to terminate the contract without penalty. This means they would not be required to pay any pre-estimated liquidated damages and their deposit or trade-in vehicle should be returned to them.
When buying a vehicle, consumers are reminded that there is no cooling-off period in WA. Changing your mind and cancelling a motor vehicle contract can be costly, so it is important to be certain about the purchase and avoid being pressured into signing a contract.
If a dealer tries to charge a fee to a consumer for cancelling a contract, the consumer is encouraged to request the dealer to prove the losses they are claiming. Consumers who are not satisfied with the damages being charged by a dealer can lodge a complaint with Consumer Protection and we can conduct an independent assessment in an attempt to resolve the matter.
Enquiries can be made by emailing email@example.com or by calling 1300 30 40 54.
Commissioner for Consumer Protection
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