|
If you sell a vehicle that is not of good
quality or is faulty, the Consumer Guarantees Act (CGA) gives the
customer the right to a repair, replacement or refund. The Act says
which of these choices the customer has in different situations.
Motor Vehicle Sales Act
The Motor Vehicle Sales Act came into effect on 15 December 2003.
From this date, used motor vehicles will no longer carry Motor
Vehicle Dealers Act ABCD warranties. In its place, the
Consumer Guarantees Act provides consumers with rights and remedies
for defective used or new motor vehicles.
This section has been updated to take account of any changes made
by the Motor Vehicle Sales Act. The information on the Motor Vehicle
Dealers Act will remain, as it may still apply to vehicles sold
before 15 December 2003.
Publication
The information on this page is the online version of the
Consumer Guarantees Act chapter of the Ministry's Business Note
publication Motor Vehicle Sales Act and related laws - a guide
for motor vehicle traders - Second Edition. If you require a
printed version of this publication, you can order it online using
our Publications
order form.
PDF version
The Motor Vehicle Sales Act - Second edition
publication is also available in Adobe
Acrobat format (276 KB).
(instructions for
obtaining the viewer)
Consumer Guarantees Act
The Consumer Guarantees Act (CGA) sets out:
- guarantees that goods and services must comply with when sold
by someone in trade
- remedies that either the seller, manufacturer, importer or
service provider is required to provide if a guarantee is not
complied with.
Application of the CGA
The CGA covers all motor vehicles sold by a person in trade that
are of a kind ordinarily acquired for domestic, personal or
household use. The definition of a person in trade includes both
registered and non-registered motor vehicle dealers and any other
person in the business of supplying goods.
Sales covered by the CGA include:
- new and used motor vehicles
- motor vehicles of a kind ordinarily acquired for personal use
– eg, sedans, station wagons, 4-wheel drives or SUVs, motorcycles,
camper vans
- vehicles that can be ordinarily acquired for both personal and
business use – eg, utes or small vans.
Exceptions
The CGA does not apply to:
- motor vehicles of a kind ordinarily acquired for a commercial
use – eg, trucks, buses
- motor vehicles sold at auction
- motor vehicles sold by a competitive tender process
- motor vehicles sold for re-sale or re-supply – eg, importer
selling to another motor vehicle trader
- motor vehicles sold privately.
Contracting out of the CGA
If you sell a vehicle of a kind ordinarily acquired for domestic
or personal purposes to a person who intends to use it in a
business, you can choose to contract out of the CGA. You must give
the buyer written notice that you are contracting out of the CGA at
the time of sale.
You can do this by providing a written agreement that says that
the vehicle will not be subject to the CGA.
If you attempt to contract out of the CGA under any other
circumstances, you will be breaching the Fair
Trading Act because it prohibits people in trade misleading
consumers about their rights. The penalties for breaching the Fair
Trading Act are substantial – fines of up to $60,000 for an
individual and $200,000 for a company.
Guarantees
The CGA gives consumers six guarantees about vehicles.
1. The vehicle must be of acceptable quality.
The vehicle must be:
- fit for the purposes goods of that type are normally used – eg,
a 4-wheel drive is suitable for off-road travel
- acceptable in finish and appearance – eg, a new vehicle should
be free of scratches
- free from minor defects – eg, the dashboard clock should be
functional
- safe
- durable – ie, the vehicle is able to be used for its normal
purposes for a reasonable time after purchase.
There is a test for deciding whether goods meet acceptable
quality. It is called the "reasonable consumer" test:
"Would the reasonable consumer find the vehicle acceptable?"
taking into account:
- the nature of the vehicle – eg, new or second-hand, the type
of vehicle
- the price paid
- any information on the vehicle (including vehicle details on
the Supplier Information Notice)
- any statement you made about the vehicle.
What if the consumer has caused the problem?
If a vehicle develops a fault as a result of the consumer’s
misuse or abuse, a claim cannot be made for a remedy under the
guarantee of acceptable quality.
From the Courts
In a case about a second-hand car the Court decided that, just
because the car had a current Warrant of Fitness, this did not mean
that a trader could claim the car met the acceptable quality test.
A Warrant of Fitness is "information about the goods". In this
case, it meant that the vehicle was safe when inspected. It does not
mean that a trader may not have to provide a remedy for a problem
unrelated to the Warrant of Fitness – eg, a problem with the car’s
CD player.
2. The vehicle must be fit for a particular
purpose
The guarantee applies when:
- the consumer tells you about or implies that the vehicle is
required for a particular purpose, and
- you advise the consumer that the vehicle can be used for that
purpose, and
- the consumer relies on your knowledge.
Example
If a customer asks if a vehicle will tow their boat, and you say
it will, it must be able to tow their boat without damaging the
vehicle.
Fitness for particular purpose is a guarantee that is additional
to fitness for "normal" purpose. Vehicles must be fit for their
normal purposes under the guarantee of acceptable quality.
We recommend that if you advise the customer the vehicle is fit
for a particular purpose, this is noted in writing at the time of
sale. This may assist you in the event of a dispute at a later date
about the fitness of the vehicle.
3. The vehicle must match its description
As the trader you are liable for any description given with the
vehicle.
This guarantee is of particular importance if consumers are
purchasing vehicles sight unseen – eg, from a website.
The Fair Trading Act also applies to information that you supply
about vehicles for sale. Under the Fair Trading Act you cannot
mislead, deceive or make false representations about the vehicles
you sell.
For more information on the Fair Trading Act, visit the
Commerce Commission website.
4. The vehicle must comply with the sample
If a vehicle is ordered from a showroom or demonstration model,
it must correspond with the model. The consumer must be given the
opportunity to inspect the vehicle against the model it was ordered
from.
5. You will give the consumer good title to the vehicle
In addition to the Personal Property Securities Act, the CGA
provides the consumer with a guarantee that:
- you have the right to sell the vehicle
- the vehicle is free of any undisclosed security interest
- they will have undisturbed possession of the vehicle.
6. Reasonable price
This guarantee only applies where you have not agreed on a price
with the purchaser at the time of sale. This situation will not
occur often in trader-to-consumer motor vehicle sale transactions.
Manufacturers’ and importers’
guarantees
Spare parts will be reasonably available
Manufacturers and importers must ensure that spare parts and
repair facilities are available for a reasonable time after the
vehicle is sold to the consumer. The responsibility does not apply
to used vehicles unless they are being sold in New Zealand for the
first time.
Manufacturers and importers can contract out of this guarantee by
giving consumers written notice at the time of purchase that spare
parts and repair facilities will not be available.
Remedies for breach of guarantees
The rights of a consumer to redress will depend on the type of
problem they have with the vehicle.
Minor faults
If the fault is minor or can easily be repaired, you can choose
to fix the problem by repairing the vehicle or giving the consumer a
replacement vehicle.
Where a repair is being provided, the consumer must give you a
reasonable time to carry this out.
The consumer must also provide you with reasonable access to the
vehicle to allow this repair to be carried out.
What is a reasonable time for carrying out a repair?
A reasonable time to fix a problem is not defined in the CGA. It
will depend on the type of vehicle and the nature of the problem.
For a vehicle that is in daily use by the consumer, a reasonable
time may only be a few days. If the repair takes a longer time, you
can offer a courtesy vehicle to the consumer.
If you require time to identify a fault, or to decide whether a
fault is serious or minor, you should discuss this thoroughly with
the consumer and seek their agreement.
If you refuse to do anything about the problem when it is
possible to repair it, or you take an unreasonable time to repair
the problem, the consumer can choose to get:
- the vehicle repaired elsewhere and reclaim the cost from you
- a replacement vehicle
- a refund.
What if the fault occurs when the consumer has the vehicle out
of town?
If the consumer has the vehicle out of town when it develops a
fault, they should let you know that there is a problem with the
vehicle before getting repairs done elsewhere. You may refer the
consumer to an agent if it is impractical to get the vehicle to you
for repairs. If you do not have an agent, the consumer can recover a
reasonable cost from you of having the vehicle repaired by someone
else.The consumer must be able to document the vehicle repairs and
cost.
The consumer may lose any right to recover the repair cost from
you if they had the vehicle repaired elsewhere and did not notify
you or give you a reasonable time to fix it.
What if the repair will be expensive?
If the cost of repair will be more than the value of the vehicle,
you do not have to choose to repair. You can either replace the
vehicle or provide a refund.
What type of replacement would I have to give?
The CGA requires that you provide an identical replacement that
is readily available. This may be a practical option to select for
new vehicles where you do not want to repair or refund. If the
vehicle is second-hand, your options will be limited to either
repair or refund if an identical replacement cannot be easily found.
What if the fault was pointed out at the time of sale?
You will not be liable for any fault you made known to the
consumer at the time of sale – eg, where a consumer buys a vehicle
with notification of a dented bonnet, the consumer cannot claim a
remedy for that fault.
Value of vehicle improved by repair
If the repair results in the vehicle being improved, or more
valuable than it was when you sold it, you may claim payment for
this difference from the consumer.
However, if a repair will result in the vehicle being improved or
more valuable, you should discuss this with the consumer before
undertaking the repair.
Serious faults
If a vehicle has a serious fault, the consumer may choose between
these remedies:
- rejecting the vehicle and seeking a refund or replacement
vehicle (of similar value and type), or
- keeping the vehicle and seeking compensation for the loss in
value.
Even if a serious fault can be fixed, the consumer may choose a
refund rather than a repair.
What is a serious fault?
A serious fault is one where:
- a reasonable consumer would not have bought the vehicle if
they had known the fault existed
- the vehicle is significantly different from the demonstration
model or its description
- the vehicle is substantially unfit for its normal purpose and
cannot be made fit for purpose by a repair
- the vehicle is substantially unfit for the particular purpose
it was purchased for – eg, you informed the consumer that the car
will be able to tow their boat and it cannot.
- the vehicle is unsafe.
From the Courts
The Courts have decided that a fault might be considered serious
when:
- the cost of the repair is high compared with the price paid
for the vehicle – eg, repairs of $1,000 required on a car bought
for $5,000
- the vehicle has a number of small faults, which on their own
may be minor, but together may be serious.
- If you accept that the fault is serious, and that you are
responsible under the CGA, you are obliged to accept the remedy
that the consumer has chosen.
Rejecting the vehicle
If the consumer wishes to seek a refund, they must reject the
vehicle. We recommend the consumer advises you in writing of the
reasons for rejecting the vehicle.
The vehicle cannot be rejected when:
- it has been disposed of, destroyed, lost or damaged after
delivery
- the consumer has run out of time to reject. The right to
reject runs from the date of purchase only until a time that such
a fault is likely to appear with reasonable use.
What if the customer has asked me to collect the rejected
vehicle?
This request is acceptable if the vehicle is in an unfit
condition to be driven to your premises. The transportation would be
at your expense.
What if I dispute the claim that the fault is serious?
If you do not accept that the fault is serious, or your
responsibility, you may reject the consumer’s claim. However, either
you or the consumer should seek an independent report on the problem
to support your views. The consumer is entitled to seek a remedy
through a claim against you at the Motor
Vehicle Disputes Tribunal (MVDT) or
Disputes Tribunal.
From the Courts
The Court decided that if a consumer was not given enough
information about the fault by the trader at the time to make it
clear the fault was serious, the consumer may still have a right to
reject the vehicle after a repair is carried out and fails to fix
the problem.
In a case about a four-wheel drive vehicle, the Court decided
that the customer should consider the type of goods and the amount
of reasonable use such goods could be put to before the fault
becomes apparent.
We recommend you provide the consumer with enough information
about the fault to allow them to make an informed decision on the
extent of the fault – to either pursue their choice of remedy or
accept your offer to repair or replace.
Refunds
Do refunds have to be in cash?
Refunds must be given in cash. The consumer does not have to
accept a credit note or another vehicle. In our view it is
reasonable to provide the refund in the form of a cheque because of
the high value of motor vehicles compared to other consumer goods.
If the vehicle is subject to a credit agreement, this must be
cancelled. Any rights and obligations under that agreement may be
taken over by you.
From the Courts
The Court decided in a case about a serious fault with a vehicle,
that it was reasonable for the consumer to retain the vehicle (but
not use it) until a refund had been made.
Refunding when vehicles are bought on credit
You must refund the deposit, the value of any trade-in and all
money paid on the credit sale agreement except for reasonable
interest charges (charges payable from the beginning of the credit
agreement until the time the right to reject the goods arose). The
consumer will have the choice of claiming a refund from you or from
a financier (if the credit agreement has been assigned to one).
Depreciation
The CGA says that you must refund the price paid for the vehicle.
There is no provision under the CGA for you to be compensated for
the depreciation of rejected goods.
Traded-in goods
If you still have the traded-in goods in the same condition, they
can be offered to the consumer instead of their cash value.
Otherwise, the consumer can claim the amount allowed for them as
well as any cash paid for the vehicle.
What if the consumer wants a replacement and I don’t have any
similar vehicle?
The consumer can choose a replacement of similar value and type
if the problem is serious or cannot be fixed. You must give a
replacement if a suitable replacement vehicle is reasonably
available to you. This may mean ordering one from the manufacturer
or buying one from another trader. If no such vehicle is available,
the consumer must choose another option.
Compensation where the vehicle is kept by the consumer
If the problem is serious and the consumer wants to keep the
vehicle, they are entitled to be compensated for the difference in
the value of the vehicle had the fault not existed. This may occur
with rare vehicles, or where the problem is to do with the vehicle’s
description - eg, if you sell a car described as a 1999 model, when
in fact it is a 1996, you may be liable for any difference in value.
Damage and extra loss
The consumer can claim compensation for any additional damage or
costs (called consequential loss) incurred as a direct result of a
problem with the vehicle.
Example
A consumer takes the car out of town for a weekend trip several
weeks after purchase. While away, the car’s engine develops a fault.
The consumer is entitled to recover from the trader the reasonable
costs related to getting themselves and the vehicle back to town,
such as breakdown and towage fees.
Limiting liability for extra loss
Your responsibility for consequential loss is limited to loss or
damage that could have been reasonably expected to have occurred as
a result of a fault.
Frequently Asked Questions
How long does the consumer have to claim a remedy?
Claims can be made under the CGA for up to six years from the
time the problem appears.
However, a delay in the consumer taking action may affect or
limit the range of remedies available to them.
If the consumer wants to claim a cash refund or a replacement
vehicle because of a serious fault, the claim must be made within a
"reasonable time". A reasonable time is the time in which the defect
would normally become noticeable.
In deciding what is a reasonable time for a defect to be noticed,
these things will be considered:
- the type of vehicle
- how the vehicle has been used
- the amount of use.
Can consumers claim a remedy from the vehicle manufacturer?
The CGA provides consumers with the choice of claiming from you
or from the manufacturer or importer, if a vehicle is not of
acceptable quality or does not comply with a description attached to
a vehicle by the manufacturer.
The CGA gives the consumer the right to claim directly from the
manufacturer for remedies specific to the manufacturer’s guarantee
of spare parts and repair facilities.
A consumer might choose to claim from the manufacturer or
importer if a vehicle is being recalled because of a specific fault
and the manufacturer is offering repairs or compensation directly to
the buyer. Or they may choose to go to the manufacturer or importer
because the trader who sold them the vehicle has gone out of
business.
You will be breaching the Fair Trading Act
if you suggest to a consumer that they must seek a remedy from the
manufacturer or importer, rather than you, when the consumer is
entitled to make that choice. Under the Fair Trading Act you cannot
mislead a consumer about their rights or remedies.
What about the manufacturer’s own warranty?
A manufacturer’s warranty is given in addition to the guarantees
in the CGA. As the seller of the vehicle you will be responsible for
meeting the guarantees included in the CGA but you are not
responsible for any of the promises made in the manufacturer’s own
warranty.
Buyers of new vehicles that have manufacturers’ warranties can
choose to claim from the manufacturer under the warranty or from you
under the CGA. You must accept responsibility if the consumer
chooses to come to you. You cannot insist that the consumer use the
manufacturer’s warranty. You will be breaching the Fair Trading Act
if you tell a consumer that they must go to the manufacturer. Under
the Fair Trading Act you cannot mislead a consumer about their
rights or remedies.
What about extended warranties (also known as "breakdown
insurance")
Extended warranties paid for by the consumer are in addition to
the guarantees given under the CGA. You cannot avoid
responsibilities under the CGA by telling the consumer to claim
under the extended warranty instead.
In our view, the extended warranty must provide the consumer with
greater rights and remedies than the CGA guarantees and remedies
provide. If the warranty provides no more than the CGA guarantees
and remedies, then you may risk breaching the Fair Trading Act for
misrepresenting the warranty as "extended".
For vehicles sold before 15 December 2003
Consumer Guarantees Act and the Motor Vehicle Dealers Act
For a time after December 2003, you may be dealing with defective
vehicles which still come under both the Motor Vehicle Dealers Act
and Consumer Guarantees Act.
This section sets out some of the key differences between
remedies available under the Motor Vehicle Dealers Act and those
available under the Consumer Guarantees Act.
Parts of the Consumer Guarantees Act and the Motor Vehicle
Dealers Act overlap. Where this is the case the customer can choose
under which Act they make a claim.
The Consumer Guarantees Act applies to all motor vehicles
normally bought by individuals or families for their own use - eg
hatchbacks, sedans, station wagons, four wheel drives, motorcycles
and vans including:
- new and used vehicles
- vehicles bought for cash, on lease or on hire purchase
- vehicles normally bought by both businesses and individuals or
families - eg, passenger vans, any models of utes and four-wheel
motorcycles regularly bought for personal uses such as hunting,
fishing or diving.
Exceptions
Vehicles such as trucks that are not normally bought for personal
or domestic use are not covered by this Act.
Vehicles sold in auction are not covered by the Consumer
Guarantees Act. Sales by a licensed dealer through an auction are
covered by the Motor Vehicle Dealers Act.
Vehicles sold to other dealers who will be offering the vehicle
for sale again are not covered by the Consumer Guarantees Act.
Commercial and non-commercial vehicles
Vehicles which are defined as commercial vehicles under the Motor
Vehicle Dealers Act may be subject to the Consumer Guarantees Act.
eg, a van that will seat more than nine people or that
weighs more than 3000kg is defined as a commercial vehicle under
the Motor Vehicle Dealers Act and will not be covered by that Act.
But the van will be covered by the Consumer Guarantees Act if it
is a type of van normally bought for personal use by families.
Guarantee of acceptable quality and MVDA warranties
The customer will have the choice of claiming under the Category
A, B, C and D provisions of the Motor Vehicle Dealers Act or under
the acceptable quality provisions of the Consumer Guarantees Act.
There are two main differences between these Acts:
- The Consumer Guarantees Act does not name a specific time
within which the customer must claim.
- The Consumer Guarantees Act includes defects in batteries,
tyres, panelwork and paintwork for all vehicles. It also covers
motorcycles less than 60cc.
Repairs
Do I have to pay if a customer gets the vehicle fixed elsewhere?
The customer must have given you the opportunity to put the
problem right first. But the customer can get the repair done
elsewhere if you have refused to do anything or have taken longer
than a reasonable time to provide a repair or replacement.
You must pay for the repair. The customer does not have to get
your agreement before taking the vehicle elsewhere and does not have
to provide quotes or written notice. But you can only be asked to
pay reasonable costs for the repair.
The CGA provisions differ from those in the Motor Vehicle Dealers
Act for category A, B and C vehicles where a customer must give you
the chance to inspect the vehicle and must give you written notice
that they are going to have repairs done elsewhere.
What if the repair adds to the value of the vehicle?
Some repairs may add to a vehicle's value (betterment). The Motor
Vehicle Dealers Act allows you in certain circumstances to claim
from the customer for an increase in the value that results from a
repair done under a category A,B or C warranty.
The Consumer Guarantees Act does not allow for this. You cannot
ask a customer to pay for the added value if they have made a claim
under the Consumer Guarantees Act. You could take a common law case
to the Disputes Tribunal or to Court to claim for the added value.
Motor Vehicle Disputes Tribunal
If the customer has made their claim under the Motor Vehicle
Dealers Act they can use the MVDI dispute procedure and the Motor
Vehicle Disputes Tribunal.
The Motor Vehicle Disputes Tribunal can hear a claim made under
the Consumer Guarantees Act if both you and the customer agree to
this in writing.
|
![[To this page's content]](../../images/transparent.gif){kind=small}
