Commissioner's Blog: Put the brakes and check for cancellation fees
Consumer Protection is alerting Western Australian car buyers to check vehicle sales contracts before signing for the correct cancellation fees and terms and conditions.
Motor vehicle dealers in WA have been caught using incorrect or outdated sales contracts which state a cancellation fee that is higher than what is now legally allowed.
Since 1 January 2022, the maximum amount motor dealers can charge a consumer who cancels a sales contract is five per cent of the contract’s value. Previously, dealers could charge up to 15 per cent as “pre-estimated liquidated damages” (PELD).
Recently, a motor vehicle dealer in Perth’s northern suburbs was issued with two infringement notices after buyers signed outdated contracts which stated the old 15 per cent PELD fee.
Since the reduction came into force, Consumer Protection received 47 complaints in 2022 relating to disputes over fees charged after contract cancellations, which is double the number lodged in 2021. Most complaints have been resolved with a total of $28,321.00 being recouped by consumers.
With no cooling off period for vehicle sales in WA, buyers should be certain before signing a vehicle purchase contract to make sure they can afford it, as cancellations can be costly.
If a buyer has paid a deposit and signed a document with the dealer, than this is a vehicle purchase contract. This locks the buyer into purchasing the vehicle, subject to any special conditions and they may not receive a full refund if they change their mind as PELD may be chargeable.
However, dealers should not automatically charge the maximum five per cent fee, as the amount needs to realistically reflect the actual costs of the cancellation to the business. They may need to demonstrate to Consumer Protection how the fee has been calculated if a complaint is received by a consumer.
More information on dealing with motor vehicle dealers and repairers is available on the Consumer Protection website where complaints can be lodged online. Enquiries can be made by email email@example.com or by calling 1300 30 40 54.
Commissioner for Consumer Protection