Do I have to fix it - A Dealer's Guide to Used Car Warranty
Most complaints the Department of Mines, Industry Regulation and Safety (DMIRS) receives regarding motor vehicles are about warranty repairs. The purpose of this booklet is to help you solve these complaints before they come to us. Of course, there will be some cases which cannot be solved easily and will require our involvement, but the advantages in you sorting out your own complaints include:
- time savings
- increased revenue
- reduced costs
- increased goodwill
- retention of customers
- improved staff morale
Research shows customers will tell up to 20 people if complaints are not fixed quickly but, on average, will recommend your business to 15 friends if they are happy with the service you provide. This booklet has been produced to provide you with assistance to resolve warranty claims and prevent disputes.
What is the statutory warranty under the Motor Vehicle Dealers Act 1973?
The statutory warranty under the Motor Vehicle Dealers Act 1973 (the Act) is a legal obligation imposed on you as a licensed dealer to fix certain defects which occur in vehicles you have sold. Section 34 of the Act describes the extent of dealer liability as:
‘...(if) a defect which renders or is likely to render the vehicle unroadworthy or unserviceable appears in that vehicle, whether or not that defect existed at the time of sale, the dealer who sold that vehicle shall, at his own expense, repair or make good or cause to be repaired or made good, that defect so as to make the vehicle roadworthy and to place that vehicle in a reasonable condition having regard to its age.’
Dealers often misinterpret this section by asking the question, ‘Do I have to fix this fault? I think it’s acceptable in a vehicle of this age.’ The question you should ask yourself is: ‘Is this defect likely to make the vehicle unserviceable or unroadworthy?’
If the answer is ‘yes,’ then you must repair it to a serviceable condition having regard to the vehicle’s age. For example, you are not required to fit new parts to a 10-year-old vehicle if there are serviceable second-hand parts available.
It is helpful to consider the meanings of the crucial terms in the warranty section of the Act. Where a term is not defined in a piece of legislation, its meaning is generally defined by the context in which it appears and its common usage.
This term is not specifically defined in the Act, however, its meaning can be determined from other parts of the Act. A vehicle is unroadworthy if it is ‘stickered’ by the police or an authorised officer of the Department of Transport or the Department of Commerce. Stickers can be placed on vehicles when, in the opinion of the person inspecting the vehicle:
- it requires any repair, adjustment or reconditioning;
- it requires the supply, fitting or removal of any equipment;
- it is in such a condition as to cause danger to any person or damage to any property; or
- it requires any other attention to make it comply with any law relating to the equipment, serviceability or roadworthiness of the vehicle.
In general terms, if the vehicle has a fault which could be ‘stickered,’ then the fault must be rectified by the dealer.
Unserviceable’ is also not defined in the Act. The Concise Oxford Dictionary defines ‘serviceable’ as:
‘of use, useful or usable...durable, suited for rough use or ordinary wear rather than for ornament.’
The most helpful word here is ‘usable’. If the defect is not one which makes or would make the vehicle unroadworthy, you must ask the question:
‘Does the defect make the car unusable or is it likely to make the car unusable?
For example, a vehicle may not be considered to be unroadworthy by the police because it has a leaking core plug, however, the defect is likely to make the vehicle unusable, so it must be fixed. One test you could apply to any problem is: ‘What will happen if I don’t fix it?’ If the result is likely to be a failure which would make the vehicle unusable, the defect should always be fixed.
Length of warranty
Under the Act, the length of the warranty period depends upon the purchase price of the vehicle, its age and the number of kilometres it has travelled at the time of sale. In the case of motor vehicles, the minimum purchase price for which a warranty applies is $4,000. For motorcycles, the minimum purchase price for which a warranty applies is $3,500.
The following table outlines the statutory warranty provisions which apply to vehicles based on their age and the number of kilometres travelled at the time of sale. The age is calculated to the end of the compliance plate date month. If only a month and year are shown on the compliance plate, the age is taken from the first day of the next month.
|Age of Car||Km travelled at time of sale||Warranty entitlement|
|Not more than 10 years||Not more than 150,000||3 months or 5,000km (whichever happens first)|
|Between 10-12 years||Between 150,000 and 180,000||1 month or 1,500 km (whichever happens first|
|More than 12 years||More than 180,000||Nil|
|Age of Motorcycle||Km travelled at time of sale||Warranty entitlement|
|Not more than 8 yrs||Not more than 80,000||3 months or 5,000 km (whichever happens first)|
|More than 8 yrs||More than 80,000||Nil|
The warranty periods do not include any time where you have possession of the vehicle for warranty repairs. For example, if you keep the vehicle for two weeks to do warranty repairs, the warranty is extended by two weeks. It is in your best interests to conduct repairs as soon as possible.
If a fault is brought to your attention during the warranty period and the same fault is still evident, or becomes evident, within a reasonable period after warranty, it is generally your responsibility to fix it.
Types of vehicles covered
For the purpose of the warranty provisions of the Act, a ‘vehicle’ is defined to mean:
- a ‘passenger car’ - a vehicle constructed principally for the conveyance of people;
- a ‘passenger car derivative’ – a vehicle of the same make as a factory produced passenger car, in which the forward part of the body and most of the mechanical equipment are the same as those in a passenger car, such as station wagons and dual-cab utes;
- a ‘motorcycle’ – a self-propelled vehicle that has two wheels or, where a sidecar is attached, has three wheels;
- a ‘camper van’ - a vehicle specially fitted for camping or touring purposes and equipped with both sleeping and cooking facilities; or
- vehicles prescribed by the regulations associated with the Act.
Vehicles not covered by warranty
Vehicles excluded from the statutory warranty provisions are:
- buses and vehicles licensed to carry more than nine passengers, including the driver;
- caravans built to be towed by a motor vehicle;
- single rider motorcycles built for offroad use;
- multi-wheeled open motor vehicles e.g. quad bikes; and
- motor vehicles built to carry goods or materials used in trade, business or industry and having only one row of forward facing seats.*
* This means station wagons and dual cabs do attract a statutory warranty, but most utes and panel vans do not attract a statutory warranty, unless they have more than one row of seats.
Displaying vehicle particulars
When you offer or display a second-hand vehicle for sale, you must attach the appropriate notice containing the required particulars of the vehicle, e.g. odometer reading, year of manufacture and cash price.
You have the choice of displaying the vehicle particulars by using:
- a plastic vehicle particulars card;
- a paper Form 4 for vehicles covered by the statutory warranty under the Act; or
- a paper Form 6 for vehicles not covered by the statutory warranty under the Act.
Where you choose to use a plastic vehicle particulars card you will be required to state whether or not the vehicle is covered by the statutory warranty. You will also be required to complete a paper version of a Form 4 or Form 6 at the time of sale, and provide the purchaser with a copy.
The notice must be attached to the vehicle and clearly visible. In the case of a motor vehicle, the notice should be placed inside the vehicle where it can clearly be read through the windscreen. In the case of a motorcycle, or a vehicle without a windscreen, the notice must be attached to the vehicle in such a way and place as to cause the particulars to be clearly visible to a person standing near the vehicle.
FORM 4 – Displayed on vehicles covered by the statutory warranty under the Act
Where you offer or display a vehicle for sale covered by the statutory warranty under the Act, a Form 4 must be displayed on that vehicle. The Form 4 comes in two versions, one for motor vehicles and one for motorcycles.
The front of each version contains the same information which explains why the vehicle is covered by the statutory warranty and identifies the vehicle particulars such as price, year of manufacture, and odometer reading. The back of each form differs as one contains a quick guide to the main warranty items for motor vehicles and the other for motorcycles.
The requirements for completion of the Form 4 at the time of sale remain the same for both versions. Two copies must be completed and signed by both the purchaser and yourself. One copy is then given to the purchaser and the other must be retained by you for not less than 2 years.
FORM 6 – Displayed on vehicles NOT covered by the statutatory warranty under the Act
Where you offer or display a vehicle for sale not covered by the statutory warranty, you will be required to display a Form 6 on that vehicle. The front of the Form 6 contains the same vehicle particulars as the Form 4 and informs the purchaser the vehicle is not covered by the statutory warranty. The back of the form explains why the vehicle is not covered by the statutory warranty together with advice about the purchaser’s rights under the Fair Trading Act 2010 (which forms a part of the Australian Consumer Law).
The requirements for completion of the Form 6 at the time of sale are the same as the Form 4. Two copies must be completed and signed by both the purchaser and yourself. One copy is then given to the purchaser and the other must be retained by you for not less than 2 years.
The Form 6 is the only notice which must be displayed on all vehicles which are not covered by the statutory warranty.
Warranty exemptions and exclusions
Can you exclude defects from warranty?
If you do not want to repair a particular defect in a vehicle which is covered by the statutory warranty under the Act, it can be excluded from the warranty, but only if the following requirements are met:
- A detailed description of the defect and a fair estimate of the cost to repair must be noted on a ‘Notice of Defects Excluded from Warranty’ (Form 5).
- The Form 5 must be placed on the vehicle before the time of sale so it can be clearly read through the windscreen.
- The Form 5 must be signed by the purchaser at, or before, the time of sale, and a copy must be given to the purchaser at the time of sale.
If the purchaser is not given a copy, or the form is not signed or was not placed on the vehicle prior to the sale, it has no effect. If you do not describe the defect fully, the notice will have no effect. For example, it would not be reasonable to state ‘engine’ as the defect and state $800 as the cost of repairs. You must describe the actual defect e.g. ‘excessive exhaust smoke - piston rings require replacement’ together with the cost of repairs.
If the estimated cost of repairs on the notice turns out to be less than the fair cost of the repairs, the purchaser is entitled to claim the difference in cost from you. There are many pitfalls in attempting to exclude warranty defects. You must be accurate in your paperwork or you may leave yourself open to carry out the repairs anyway. This type of exclusion is not used very often because of the problems which may occur.
Can you waive the statutory warranty under the Act?
Neither you nor the purchaser can actually waive any rights given under the Act, including the statutory warranty, without the prior consent of the Commissioner for Consumer Protection (the Commissioner).
A statutory warranty may be waived if you follow a few simple rules:
- The purchaser must make an application to the Commissioner through the Automotive, Marine and Trading Hours Branch of Consumer Protection before the vehicle is sold.
- An application may be made in person, by fax or email and must include:
- a completed application for warranty waiver form;
- a copy of the contract to buy the vehicle;
- a copy of a completed Form 4; and
- a detailed independent mechanical report on the vehicle’s condition.
When a warranty waiver application is assessed we look at factors such as whether:
- the purchaser has received a genuine price reduction for the vehicle in return for waiving the warranty;
- the purchaser accepts the mechanical inspection is thorough, fair, accurate and highlights all defects;
- the likely cost of repairs for warranty defects which are disclosed in the mechanical report is substantially less than the discount offered, with sufficient discount left to justify waiving the warranty;
- the purchaser fully understands the effect of the rights they are being asked to give up; and
- the purchaser understands those rights under the Fair Trading Act 2010 which cannot be waived.
Staff of the Automotive, Marine and Trading Hours Branch will generally waive the warranty if satisfied these conditions have been met. The warranty is not waived until the application is endorsed by Consumer Protection and you receive a copy of the Department of Mines, Industry Regulation and Safety approval, normally within 24 hours.
You should not deliver the vehicle to the purchaser until the warranty is waived. If an application is not accepted nor approved by us, the purchaser cannot waive the warranty. We have had cases where a dealer has reduced the price of a vehicle and the purchaser has agreed to waive the warranty. However, as it was a deal done between the dealer and purchaser without approval from the Commissioner, the warranty still stood.
Further, you could be leaving yourself open to possible prosecution action for trying to avoid a provision of the Act. The requirements of the Act will override any agreement between the two parties.
Carrying out warranty repairs
When a customer returns a vehicle for warranty repairs it is in your best interests to carry them out as soon as possible. As mentioned previously, the time you have the vehicle for warranty repairs is added to the warranty period.
If you hold the vehicle for longer than is considered normal for a particular repair, your customer may be able to claim damages from you to cover such expenses as hire cars or taxi’s.
It is not a requirement of the Act for a customer to return the vehicle to you for warranty repairs. However, we tell them to always contact you first about carrying out warranty repairs. If they get it fixed elsewhere you may only have to pay what it would have cost you to repair the defects. If vehicles go back to you two or three times for the same repair, customers may exercise their right to take the vehicle elsewhere and claim the full cost of repairs from you.
It could cost you more money in the long run if you do not make sure repairs are carried out properly in the first place. Remember, the Commissioner is able to apply to the State Administrative Tribunal to disqualify a dealer from holding or obtaining a licence if they find a dealer has not carried out warranty obligations with ‘due expedition’ (as quickly as possible).
When you have a customer’s car it is always a good idea to keep the person informed of what is happening. If there are going to be delays it is best to say so, instead of allowing the customer to come to collect a car which is not ready.
When returning the car it is advisable to tell the customer what has been done or give them an itemised list. This can avoid disputes later if a customer complains that you did not fix a particular defect during warranty.
If the owner lives close to your business and the vehicle is driveable they should return it to you. If, however, the vehicle is undriveable, you should arrange to have the vehicle returned to your premises.
If a customer requires warranty repairs and does not live near your business you have two options:
- you can arrange for a repairer in the area where the owner lives to fix the vehicle. It is your responsibility to pay the repairer; or
- you can arrange for the vehicle to be transported to your premises, repaired and returned to the customer. This should be at no cost to the customer.
Do you have to supply a courtesy car?
As the name implies a ‘courtesy car’ is just that – a courtesy to the customer. When repairing a customer’s vehicle you are under no obligation to provide a loan car. However, doing this may improve the image of your business and enhance customer goodwill.
If you have to hold a customer’s car for longer than anticipated it may be a good idea to arrange a loan car. This will reduce the likelihood of the person claiming damages from you for any delays.
If you give a customer a loan vehicle make sure they are aware of any insurance requirements which apply. You should make sure the customer reads, understands and signs a document which outlines their rights and responsibilities for the loan car. Doing this can help avoid disputes.
Other warranties on second-hand vehicles
Fair Trading Act 2010
When someone buys a vehicle from you which is not covered by the statutory warranty under the Act, the purchaser does have some protection under the Fair Trading Act 2010.
The Fair Trading Act 2010 requires a dealer selling a vehicle to ensure the vehicle matches any description given and it is of ‘acceptable quality’. This means it must be fit for the purpose for which a vehicle of that nature is normally used. The amount of money paid for the vehicle is taken into account when determining acceptable quality.
For example, even though a vehicle is not covered by the statutory warranty under the Act, a purchaser is entitled to expect you to repair any major defects that were present at the time of sale which prevent the vehicle from being used in the normal way. This also applies to anything that makes it unsafe to drive (e.g. faulty brakes, faulty steering or major structural rust).
The requirement of acceptable quality does not apply to defects specifically drawn to the purchaser’s attention before the contract of sale is made or, if the purchaser examines the vehicle before the contract is made, for defects the examination should have revealed.
The same rules would apply with vehicles which are exempted under the Act. If you sell an exempted vehicle which develops a serious defect shortly after you sold it, the customer may have a claim under the Fair Trading Act 2010. Each case must be viewed separately. If you are unsure of your obligations, give us a call.
Australian Consumer Law
All vehicles come with additional guarantees under the Australian Consumer Law.
Purchasers are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. A major failure will occur where the vehicle:
- has a problem that would have stopped someone from buying it if they’d known about it;
- has multiple minor problems that, when taken as a whole, would have stopped someone from buying it if they’d known about them;
- is significantly different from the description given by you;
- is substantially unfit for its purpose and can’t easily be fixed within a reasonable time; or
- is unsafe.
Purchasers are also entitled to have a vehicle repaired or replaced if it fails to be of acceptable quality and the failure does not amount to a major failure.
Do you have to fix accessories/extras?
Generally you do not have to fix accessories or extras.
However, the Fair Trading Act 2010 states a person shall not engage in conduct which is misleading or deceptive or is likely to mislead or deceive. So, in some cases you may be obliged to rectify faults with accessories.
For example, if a vehicle is advertised as air-conditioned or having a radio, it is expected these accessories will work at the time of sale. If they don’t, the customer may have some claim on you for repairs.
The same principles would apply to a vehicle sold as having air bags or ABS brakes fitted. If the air bags have been identified or represented as a feature of a vehicle, then it is our view the warranties implied by the Fair Trading Act 2010 would apply.
Dealer’s responsibility when ‘accessorising’ vehicles
Dealers should be conscious of their responsibilities if ‘accessorising’ or ‘modifying’ vehicles before offering it for sale. Some of the modifications involve the fitting of after-market exhaust systems, tyres and/or rims. The tyres and rims can often be larger or lower profile than the recommendations of the manufacturer and lowers the vehicle’s ride height. This is done to make the vehicle more appealing to prospective buyers with the practice being applied to both new and second-hand vehicles.
However, many of these modifications are actually non-compliant (illegal) because they do not comply with the manufacturer’s specifications or the Australian Design Rules (ADR).
ADRs apply to the construction of vehicles which are to be licensed for road use. They apply to manufacturers of vehicles and under state law, vehicles must remain compliant with those rules if used on public roads. Under the Australian Consumer Law goods supplied in the course of business must be of acceptable quality, which means they must be fit for the purpose for which they are supplied. Dealers fitting non-compliant accessories to a licensed road vehicle would therefore have an obligation to rectify any faults or noncompliant components provided with the vehicle at the time of sale.
This could include having the vehicle modifications ‘engineer approved’ and noted as ‘passed’ by the Department of Transport. You may also incur the cost of returning the vehicle to a legal condition, as well as compensating your customer for the associated drop in the vehicles value.
Consumer Protection does not interfere with your right to supply or fit the non-standard, after-market accessories. However you are required to know if the modifications will make the vehicle non-compliant. The illegal modification could also cause problems for you as the selling dealer when it comes to any manufacturer’s warranty issues, or more significantly, serious insurance implications.
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