Faulty or defective vehicles
The Consumer Guarantees Act provides you with rights and remedies for a faulty or defective vehicle.
Consumer Guarantees Act
The Consumer Guarantees Act provides you with rights and remedies for a faulty or defective vehicle.
The Act applies to the sales of motor vehicles to consumers by traders (including unregistered motor vehicle traders), where the motor vehicles are of a kind ordinarily bought for personal or domestic purposes including:
- new and used motor vehicles
- motor vehicles bought for cash, on lease or on credit contract
- motor vehicles bought as a gift
- motor vehicles sold by a trader “on behalf” of a private seller.
The Act does not apply to:
- motor vehicles sold at auction, by competitive tender, or by private sale
- motor vehicles of a kind ordinarily bought for commercial purposes – e.g. trucks, buses. This rule applies even if you choose to use any of these motor vehicles for personal or family use.
Buying a motor vehicle for business use
If you told the trader you were purchasing for a business purpose, the trader may have contracted out of the Consumer Guarantees Act at the time of sale. The trader has to do this in writing.
Look for a statement in your contract such as: “The purchaser acknowledges that they are buying the car for a business purpose and that the Consumer Guarantees Act does not apply.”
If you find a statement like this, you will probably find that the seller may have also contracted out of the implied quality terms of the Sale of Goods Act.
You will not be able to rely on the remedies available in these Acts for problems with your vehicle. Your rights may be limited to those available under a manufacturer’s warranty or under any seller’s warranties contained in the contract itself.
Shirley buys a car to use as a taxi. The trader gets her to sign the part of the contract that says the Consumer Guarantees Act does not apply, as the purchaser is acquiring the car for business use. This means that if there are problems with the car, Shirley will not have rights under the Act.
Guarantees under the Consumer Guarantees Act
Acceptable quality guarantee
When you buy a vehicle it must be of acceptable quality.
A vehicle will be of acceptable quality when it:
- is fit for all the purposes it would normally be used for
- does not have any minor faults
- is acceptable in appearance and finish
- is safe to use
- is durable.
The test for deciding whether goods are of acceptable quality
“Would a reasonable consumer find the vehicle acceptable taking into account...”
- the type of the vehicle, its distance travelled, its age, its engine size
- the price paid for it
- any information provided about the vehicle – e.g. in advertising or in the vehicle manual
- anything the seller told them about the vehicle
- how much it has been driven since purchase.
Debbie bought a car six months ago from a trader. It cost her $12,000. The car was four years old. The trader told her it was a very reliable car and should last for a long time. When she takes the car for a Warrant of Fitness it fails because of an electrical problem affecting the headlights.
Compare Debbie’s car with this one:
Angeline bought her car six months ago from a trader. It cost her $2,000. The car was 15 years old, and not in a good condition. The paintwork was scratched and there were some dents in the body.
When she takes the car for a Warrant of Fitness, it fails because of an electrical problem affecting the headlights.
Most people would not be surprised if a 15-year-old car which cost $2,000 had some electrical problems requiring repairs within six months of purchase. However, a person who buys a car for $12,000 and is told that it is reliable would not expect it to fail a Warrant of Fitness within six months because of electrical problems.
What if the trader points out the problem before I buy the vehicle?
If the trader advised you of the problem in writing before you purchased the vehicle, you cannot ask the trader to fix that problem under the Consumer Guarantees Act.
What if I caused the problem because of the way I drive?
If the problem was caused by your misuse or neglect of the vehicle, you have no right to a remedy from the trader for that problem – e.g. you take your car off-road but it is not a four-wheel drive and the suspension is damaged. You cannot expect the trader to fix the damage you caused.
As well as the guarantee of acceptable quality, your vehicle must also be:
- fit for any particular purpose you tell the trader you need the vehicle for
- e.g. Alyssa tells the trader she needs a car that will be able to tow her boat. She carefully explains to the trader the type of boat and how far she needs to tow it. If the trader tells her the car will be able to tow her boat, she will have a remedy against the trader if the car cannot tow the boat to the local lake
- match the sample or demonstration model
- e.g. if you place an order for a vehicle based on a showroom example
- match any description given of the vehicle
- able to be legally sold – the trader must have the right to sell the car. If this is the problem with your car, see Money owing by a previous owner
- a reasonable price, if no agreement has been made about the price.
- e.g. George orders a car from a friend who is a car importer. George explains exactly what type of car he wants, but they do not discuss the price of the car. When the car arrives in New Zealand, the importer can only charge George a ‘reasonable price’ for the car – this is likely to be based on the market value of a similar car.
Guarantee of spare parts and repair facilities
The Consumer Guarantees Act makes manufacturers, importers and distributors responsible for ensuring that spare parts and repair facilities are available for the vehicles they assemble or import. They can supply the parts and service themselves or ensure that they are available through agents.
The guarantee applies to all goods being sold in New Zealand for the first time. It covers imported second-hand vehicles when they are first offered for sale in New Zealand and all new vehicles.
If you have a complaint that spare parts or repair facilities are not available, you should take this up with the manufacturer or importer.
This guarantee does not apply if you are advised when you buy the vehicle that spare parts or repair facilities are not available, or are only available for a certain period of time.
The remedy you are entitled to for a breach of a guarantee depends on the seriousness of the problem. If the problem is serious, you may claim from a choice of remedies.
If the problem is not serious, the trader may choose the remedy.
The trader should look at the vehicle and discuss the faults with you before you decide on an option. If you and the trader can’t agree whether the problem is serious, or if the trader refuses to do anything at all, take the vehicle for an independent report on the fault and the cost to fix it. You can then work out what remedy you can claim from the trader.
If the fault is minor and can be remedied
The trader can choose to remedy the fault either by repairing the vehicle or by replacing it with an identical vehicle or refunding the purchase price. The trader must act within a reasonable time and provide the repair or replacement free of charge.
If a trader refuses to do something about a problem, or if they take more than a reasonable time to put it right, you can claim the cost of having the vehicle repaired elsewhere.
Or, you can reject the vehicle and claim either:
- a refund; or
- a replacement of the same type and similar value if one is available in the trader’s stock.
For minor faults you must give the trader the chance to fix the vehicle
If they refuse to do anything or take longer than a reasonable time to fix the problem, you can take the vehicle elsewhere for repair. You will have to pay for this repair, but you can claim the cost back from the trader.
If the trader refuses to fix a problem, you do not have get their agreement before taking the vehicle elsewhere. However, it is a good idea to keep the trader informed about this – it may assist you in recovering the repair costs at a later date.
How long should the trader take to repair the problem?
The trader should do the repairs within a reasonable time. What is reasonable will depend on the type of problem. The trader needs to take into account that many people rely on their cars for work, family, and recreational activities so would need their vehicle fixed quickly.
You could ask the trader for a “courtesy car” or to meet your costs of having to use other transport – e.g. taxi or bus fares – while the repairs are carried out.
If a trader does not fix a problem within a reasonable time you have the right to reject the vehicle and get a refund.
My car has broken down out of town, what should I do?
Contact the trader to advise that there is a problem. The trader may ask you to take the car to an agent or a mechanic whom they do business with. If the trader tells you to return the car to them, they may be responsible for meeting the cost of transporting the car.
The trader wants to give me a refund, can I demand a repair instead?
No, you cannot force the trader to repair the vehicle. If a trader thinks that the repairs will be too expensive, they can choose to give you a refund.
Extended warranty claims
If you purchased an extended warranty with the vehicle or it was part of the vehicle’s price, the trader may tell you to make a claim under this warranty to fix the vehicle.
If the problem is one that the trader should fix under the Consumer Guarantees Act, you should not have to claim under your warranty.
Serious faults or faults that can’t be remedied
To decide if a fault is “serious” ask yourself the following questions:
- how soon after purchase did the vehicle develop the fault? The shorter the time, the more serious the fault
- what was the purchase price of the vehicle? The more expensive the vehicle, the less acceptable any fault is
- what was I told about the vehicle – in the advertising, on the Consumer Information Notice, or by the trader? If the vehicle is very different from what you were told, this may make the problem serious
- does the fault make the vehicle unsafe? If the vehicle is unsafe, the fault is serious
- have there been any other faults with the vehicle? If yes, then this will mean the fault is more likely to be considered serious. Several minor faults with the same vehicle can add up to a serious fault
- how much will the repair cost? If the cost of the repair adds up to a large percentage of the purchase price the fault is likely to be serious. Even if the repairs are not expensive, the fault may still be serious – e.g. if the fault makes the vehicle unsafe
- if the vehicle is not fit for a particular purpose that you made known to the seller and it cannot easily and quickly be made fit for this purpose, this is a serious failure – e.g. you needed the vehicle to tow a boat, but it does not have the power to do this and it can’t be altered.
What if the trader does not agree that the problem is serious?
Take the vehicle for an independent check. Ask for a written report on the fault and a quote for the repairs. If a report supports your claim that the fault is serious, return to the trader. You will have to pay for this report yourself, but you could claim the cost back.
Remedies for a serious fault
Where there is a serious fault, or one that cannot be fixed, you can choose between:
- rejecting the vehicle and claiming a refund
- rejecting the vehicle and claiming a replacement of the same type and similar value (if one is available in the trader’s stock)
- keeping the vehicle but getting some of your money back.
Often where there is a serious fault, the trader will offer to repair it. It is your choice whether to accept this offer. If you agree to a repair and it does not fix the problem properly, or if the vehicle develops further faults, you will still have the same rights under the Act.
'Rejecting' the vehicle
To claim a refund for a serious fault you must first reject the vehicle. The Act says you must tell the trader that you’ve decided to reject the vehicle and your reasons for doing so.
We suggest the best way to do this is to write a letter to the trader stating you are rejecting the car. Make sure you date the letter and keep a copy.
A sample ‘rejection’ letter…
The car I purchased from you on [date] has a serious fault. The fault is [describe the problem]. I have included a mechanic’s report that proves this. I am entitled to reject the car under the Consumer Guarantees Act. This letter is to inform you that I am rejecting the car today. I now require that you refund me the purchase price [and/or return my trade-in]. Please contact me to arrange this. I will return the car once you have agreed to refund the purchase price and or the trade in. I would appreciate a reply within two working days of your receipt of this letter.
If the trader refuses to take the vehicle back or refuses to refund your money, it is important that you have a written record that you tried to reject it. You can request that the trader collects the vehicle, if it cannot be driven because of the fault. The cost of transporting the vehicle should be met by the trader.
If the trader will not refund money to you, you do not have to return the car, but it is important you inform the trader of your intention to reject.
How long do I have to reject the vehicle?
If you want to claim a cash refund or a replacement vehicle because of a serious fault you must make your claim within a “reasonable time”. A reasonable time is the time in which such a defect would normally become noticeable. In deciding what is a reasonable time for a defect to be noticed, consideration is given to:
- the type of vehicle
- how the vehicle has been used
- the amount of use.
Six months after being bought, William’s car fails its Warrant of Fitness check due to rust in the chassis. William should inform the trader at this time that he is rejecting the car. If he waited several months after the warrant check before telling the trader he wanted to reject the car, he may lose the right to reject the car.
It is important that you advise the trader you are rejecting the vehicle as soon as possible after you discover a serious fault, whether or not the trader agrees with you that the fault is serious.
Refunds in cash
The Act requires refunds to be given in cash. You do not have to accept a replacement vehicle. If you paid by cheque and the cheque has not been cleared, the trader can wait until it clears before giving the cash refund.
Can the trader reduce my refund because the vehicle’s value has depreciated?
No. The Act says the trader must refund the price paid for the vehicle.
Will the refund include the value of my trade-in?
You should also receive, as part of the refund, an amount equal to the value you were given for the traded-in vehicle. The trader can return the trade-in vehicle instead – if you agree.
I want to keep the vehicle – can I get compensation for the fault?
Yes. You are entitled to be compensated for the difference between the value of the vehicle with the fault and the value it would have if the fault did not exist.
Vehicles on credit contract/credit
If you bought your vehicle on a credit contract, your rights are the same as a cash buyer. But be aware,did the car dealer arrange the finance for the purchase of the vehicle? If so, the finance company is also responsible under the Consumer Guarantees Act and has the same obligations as the car dealer.
If the fault is minor
The trader will be responsible for fixing the problem. Do not stop making payments on your credit contract while the vehicle is being fixed. This could result in you being charged penalty interest or late payment fees, or the finance company taking steps to repossess.
If the fault is serious do I have the right to a refund?
Yes, you have the same rights as a cash buyer. The trader or the finance company will have to refund the deposit, the value of any trade-in, and money paid on the credit contract.
You should tell both the trader and the finance company that you are rejecting the vehicle. Send a copy of the rejection letter to the finance company and the trader.
If the trader and the finance company will not refund your money do not stop our payments until you get an independent mechanic’s report showing there is a serious fault, and you have sent the letter explaining that you are rejecting the vehicle.
If you stop making payments without taking steps to inform the trader and the finance company, the car may be repossessed. Once the vehicle is repossessed it may be difficult for you to prove it was faulty.
General questions about the Consumer Guarantees Act
What if I’m entitled to a replacement vehicle but the trader does not have any similar cars?
The trader must give a replacement if a suitable replacement vehicle is reasonably available to them. If no similar vehicle is available, you will have to choose another option.
I received my car as a gift. Do I have rights?
Yes. If you received a car as a gift, you have the same rights to claim under the Act as the person who bought the vehicle.
Damage and other loss (consequential loss)
You may be able to claim for damage and extra loss caused by a problem with a vehicle. This extra loss is called “consequential loss”, and covers any additional loss you suffer as a result of the problem – e.g. cost of taxi fares, phone calls. Your claim is limited to loss or damage that could have been expected to result from the fault with the vehicle.
Alan has found that his station wagon, which he bought three weeks ago, has an oil leak. Oil has stained his driveway leaving a costly mess to clean up. If Alan can show that the damage to the driveway was caused by the oil leak, he could ask the trader to repair the leak and pay the cost of having the driveway cleaned.
Auctioneers and vehicles sold by tender
The Consumer Guarantees Act does not apply to vehicles sold at auction or by competitive tender.
If you were misled about the fault (or lack of faults), you may have a claim under the Fair Trading Act.
Sale of Goods Act
The Sale of Goods Act may provide you with a remedy from an auctioneer for a defective car. Under this Act vehicles must be fit for their purpose and of merchantable quality – this means they must be in a fit state for sale. Be aware, auctioneers can contract out of their obligations under the Sale of Goods Act at the time of sale.
Extended warranty or breakdown insurance
If you bought an extended warranty or breakdown insurance from the auction house, you may be covered for any fault that occurs. Read the terms and conditions of the contract or policy to see if you are covered and how to make a claim.
Private sale (or private sale from a car fair or market)
The Consumer Guarantees Act does not apply to private sales, but the Contractual Remedies Act might.