Do Australia's lemon laws protect you?

21 November 2017
 by 
, CarsGuide

I know what you’re thinking; why should you care about lemon laws (essentially, laws designed to protect you if you've bought a car that turns out to be 'lemon', which is not so much a bitter fruit as a poorly built or defective motor vehicle)? You didn’t buy a cheap and Chinese box of asbestos, and nor did you buy some small-fry micro-brand. You were smart. You went for a major player with a strong track record. Maybe something Japanese. Or German.

Besides, with modern cars designed and engineered by the brightest minds in the business, rigorously tested, crashed, crawled over and driven endless kilometres before they’re put on sale, what could possibly go wrong?

The answer, I’m afraid, is everything. And it doesn’t matter what brand you choose (although some are undeniably worse than others).

A major survey by the consumer-advocate bible Choice quizzed 1505 new car buyers across the country between January 2011 and January 2016, and found that 66 per cent of people reported mechanical problems within the first five years of ownership.

Sure, many of those were minor issues and easily fixed, but far more worryingly, a notable 14 per cent of respondents reported major issues that “seriously impaired the car’s operation or left it unusable”.

That’s a big and scary number, and it means that 14 of every 100 new cars sold could be a disaster waiting to happen. Want an even scarier number? Using those same percentages, of the more than 1.1 million new cars sold in Australia in 2016, more than 155,000 will suffer a major failure within the first five years of ownership - an unbelievable figure when you consider how much people are spending on their new wheels.

And a depressing one, when you consider what a let down that must be for people who expected to enjoy new car joy and were stuck with the bitter taste of lemon instead.

And while any sane person might think that, because your spanking new car has cost you many thousands of dollars, you’d be somehow protected if something should go wrong the moment you left the dealership, sadly the truth is a little murkier…

Car lemon laws - Australia

It’s hard to know what would wipe that new car smile off your face faster; something important falling off your shiny new wheels when you're barely out of the dealership driveway, or some annoying, reoccurring problem that sees your new vehicle up on a hoist more often than it is on the road, as mechanics try, and try again, to fix the issue?

Both would suck, of course, but the big question here is exactly what happens when something does go wrong. With no concrete car lemon laws in Australia (although a push to introduce them is well underway), you won’t automatically get the same protections that are offered overseas.

In the USA, for example, strict lemon laws mean solid protection for consumers, but they do vary from state to state. Introducing such an American-style system here would see buyers forced to wade through regulations covering lemon laws NSW, lemon laws QLD, lemon laws Victoria, lemon laws WA, depending on where they purchased their car. Unsurprisingly, Lemon Laws Australia campaigners want a nationally applied rule that covers all states and territories.

But back to the USA, and to use California as an example, a new vehicle is protected under the state’s lemon laws for the duration of the warranty period, ensuring that, once a manufacturer has made “reasonable attempts” to repair the vehicle, it will be replaced with a new one, or the cost refunded.

The details get a little lost in legalese, but the basic understanding is that if a manufacturer has made two attempts to repair a warranty problem serious enough to cause injury or death, or any one problem four times, or if the vehicle has been out of service for 30 days total, then the “buyer is entitled to a replacement vehicle or a refund of the purchase price”.

Singapore has its own simplified version of lemon laws, which are held up by Australian campaigners as the perfect system to be installed here. Their system gives consumers the automatic right to return any product that fails within the first 30 days of purchase, and was proposed to the Federal Government during a two-year lemon-law review. Unfortunately, and not atypically for our slow-moving governments,  there are yet to be any changes to Australian laws.

"They reverse the onus of proof, so if a consumer buys a good and within six months of the purchase of that good it's defective, they could return that good to the retailer and the presumption is that the good was defective," says Zac Gillam from the Consumer Action Law Centre (CALC)

"It is up to the retailer to show the good is not defective when it was sold. In the Australian system and most systems, the onus lies on the consumer to show that the good was defective.”

China also has its own version of lemon laws, as does the UK and many other jurisdictions. But Australia… doesn’t. We have Australian Consumer Laws (ACLs), upgraded in 2011 and reviewed again this year, which critics say don’t go far enough, which is why they're still pushing for stricter Australian lemon laws to be introduced.

Car companies, perhaps unsurprisingly, say the current laws are plenty harsh enough, thanks very much, despite the fact that those same companies operate under far stricter conditions in other countries.

The idea behind our ACLs is pretty simple: if a major failure is identified, and the car owner wants a refund for a lemon, then that consumer can demand it. But what constitutes a major failure is a bit of a grey area. The ACCC describes it as (and excuse the legalese here, but it’s safest to reproduce the list in full):

“A reasonable consumer would not have bought the motor vehicle if they had known about the full extent of the problem. For example, no reasonable consumer would buy a new car with so many recurring faults that the car has spent more time off the road than on it because several mechanics have been unable to solve the problem.

“The motor vehicle is significantly different from the description, sample or demonstration model shown to the consumer. For example, a consumer orders a car with a diesel engine after test-driving the demonstration model, but the car delivered has a petrol engine.

“The motor vehicle is substantially unfit for its normal purpose and cannot easily be made fit within a reasonable time. For example, the engine of a pick-up vehicle, with a stated towing capacity of 3500 kilograms and normally used for towing, has a design flaw that causes it to overheat when it tows a load of more than 2500 kilograms.

“The motor vehicle is substantially unfit for a purpose that the consumer told the supplier about, and cannot easily be made fit within a reasonable time. For example, a sports utility vehicle does not have enough towing capacity to tow a consumer’s boat, despite the consumer telling the supplier the boat’s specifications.

"The motor vehicle is unsafe. What is ‘unsafe’ will depend on the circumstances of each case. For example, a truck has faulty brakes that cause the vehicle to require a significantly greater braking distance than is safe for normal use.”

Now, there are some exceptions, mostly covering things like user-error and aftermarket accessories. But crucially, a consumer can’t immediately declare a failure major, even if it is a significant engine fault. Instead, the dealership gets to repair the issue and you’re sent on your way. And often more than once, in fact. The word "frustrated" does not come close to how people are left feeling in this situation.

Australian consumer law: used cars

While the Australian Consumer Laws don’t directly talk to used cars, there is a set of 'Dealer Guarantees' that act as used-car warranty and new-car warranty laws.

For second-hand purchases, the used-car statutory warranty that covers your purchase is limited to 5,000km or three months after purchase, whichever occurs first, provided the car has driven less than 160,000 km and was less than 10 years old when purchased.

The new-car dealer law is more generous, depending how many kays are on the clock at purchase. If it’s less than 15,000km, you’re covered for 20,000km or 12 months. If it’s more than 15,000km, however, you’re back to 5000km or three months.

I bought a lemon - what do I do now?

On this, we’ll hand over to consumer experts Choice, who advise the following steps:

Contact the dealer and the Australian head office of the car company

Make sure you put all your communications in writing

Mention the Australian Consumer Law and consumer guarantees

Mention "major failure”

In the meantime, cross your fingers that you don’t buy a lemon. Sure, there are some protections in place, and there’s a good chance we’ll get more, but none of the above sounds like much fun, and will surely sap the excitement right out of what should be an exciting purchase.

The worst thing is that you really can't tell which car is going to be a lemon, and even the really good carmakers produce some, now and then. In the USA, for example, they are left with no choice but to fix those problems (and it's worth examining that country's JD Power Vehicle Dependability statistics, just to see which companies have fewer failures), but in Australia you won't be so lucky.

But if all else fails, remember that famous saying: if life gives you lemons, then fully explore your refund and replacement rights under the Australian Consumer Laws.

Have you been involved in a battle with a car company over a lemon? Let us know what happened in the comments below.

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