3 December 2021

Changes to the cost of cancelling a vehicle purchase contract

From 1 January 2022, the maximum amount of pre-estimated liquidated damages that can be charged by a motor vehicle dealer in Western Australia will reduce from 15 to five per cent of the purchase price of the vehicle.

A dealer can charge liquidated damages when a buyer cancels a vehicle sale contract, but the amount charged must be a genuine estimate of the loss a dealer expects to suffer as a result of the cancellation.

Consumer Protection is aware that some dealers have been automatically charging consumers the maximum amount of liquidated damages when they cancel a contract to purchase a vehicle, instead of a reasonable estimation of the actual cost to the dealership. This practice is one of the reasons why the maximum amount is being reduced to five per cent.

In determining a realistic amount to charge for cancellation, dealers must be able to demonstrate their calculation of liquidated damages and link it to an actual cost, in order to justify that the charge is reasonable.

Consumers who are not satisfied with the amount of damages a dealer is seeking can lodge a complaint with Consumer Protection. We will conduct an independent assessment in an attempt to resolve the matter.

Dealers will need to be able to demonstrate how the cancellation of the contract leaves them out of pocket and substantiate the charge to the consumer.

Additional information is available on our Cancelling a contract to buy a vehicle with a dealer page.