Cancelling a contract to buy a car

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Licensed dealers in Australia are required to provide you with a copy of a contract for sale when you decide to buy a car.

This contract becomes legally binding once it’s signed by car buyer and seller. It is important to note cooling-off periods don’t apply to car purchase contracts in Western Australia. You can withdraw from the deal before signing the contract without any penalty.

If you need to cancel the contract after signing, the dealer may ask you to pay ‘pre-estimated liquidated damages’ (PELD) for losses they have incurred as a result of the sale termination. In Western Australia, these damages can’t be more than five per cent of the total purchase price of the car.

The fee charged must be genuine and reasonable and could cover costs, such as preparing the car for delivery, as well as transport and administration costs. A dealer should be able to explain how the liquidated damages were calculated.

You may not have to pay liquidated damages if the dealer has breached their obligations and is unable to deliver the car by the agreed date. If you can prove you have taken all reasonable steps to meet your contractual obligations but are still unable to do so, you should not be charged any fees.

Situations where it may be reasonable to cancel a contract and not be charged can include:

  • trying to obtain a loan for the purchase
  • cancelling a contract within two hours of purchase because the car won’t possibly fit in a garage

If you think the cost of pre-estimated liquidated damages asked by a dealer is excessive, discuss this with the dealer directly.

If you are not happy with their response, contact Consumer Protection on 1300 30 40 54 or by email for further assistance. If you can’t reach a satisfactory resolution, you can make a complaint.

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