Discussion Paper: Review of the Consumer Information Standards (Used Motor Vehicles) Regulations 2003

May 2006

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4. Assessment of Information Required

The regulations set out the particular details that are to be supplied to the consumer when buying a motor vehicle and the form in which it is to be provided (i.e. the SIN).

The supplier and standard vehicle information is found on the front of the SIN. It is separated into three categories: supplier or seller details, sale details (including standard vehicle details), and information about imported used vehicles.

Advice about consumer rights in relation to motor vehicles is found on the back of the SIN. This information includes advice about the rights and redress for consumers buying a motor vehicle. It also includes explanatory information about some vehicle- related information marked by an asterisk on the front of the SIN, along with details about where to go for further information.

This chapter looks at the information that is required on the SIN. It assesses the importance of this information in terms of its benefit in helping buyers make informed decisions, and whether the manner in which it is provided supports its value.

Supplier (Seller) Details

Supplier's Name and Address and Contact Information

Currently, the supplier must state their name, address and any other contact information unless the vehicle is displayed for sale by auction. In the case of sale by auction the auctioneer must state their name, address, and any other contact information in place of the seller's information.

The information gives the buyer the details needed to contact the supplier after the sale to seek redress if things go wrong. No need to change these information requirements has been identified.

Registered Motor Vehicle Trader and Registration Number

The regulations require the supplier to indicate whether they are a registered motor vehicle trader by ticking the appropriate box - "yes" or "no". If registered, they are required to provide their registration number. The seller must leave this space blank if they are not a registered trader.

The importance of this information to consumers has not been challenged. Consumers are increasingly buying motor vehicles at venues where both traders and private individuals are offering vehicles for sale. They need to be aware of their rights when making their decision.

Buyers have better redress options when buying from traders than from private sellers. A motor vehicle trader is subject to the Consumer Guarantees Act 1993 and Fair Trading Act 1986 and can be taken to the Motor Vehicle Disputes Tribunal. A private seller is not required to comply with this legislation and cannot be taken to the disputes tribunal.

Providing a registration number enables a buyer to look up the Motor Vehicle Traders Register to check the registration status of the trader before they buy the motor vehicle. It is also useful for trader identification purposes if a buyer needs to seek redress or make a complaint against the trader, particularly if they are not selling from a conventional car yard.

It has been suggested that the requirement to leave the blank space when the seller is either a private seller or an unregistered (and illegal) trader, creates confusion.

A suggested alternative (to the yes/no tick box) is to require the seller to provide either their registered motor vehicle trader number or state unequivocally that the sale is a private sale. The latter statement would be in breach of, and prosecutable under section 13 of the Fair Trading Act 1986, if made by any person treated as a motor vehicle trader under the MVSA, whether registered or not.

There may be concern that, under this option, some traders will take the risk and portray themselves as a private seller regardless of what the regulations say. On the other hand, the consumer entering such a sale does so with a more limited expectation of the redress available and presumably offsets that against the price offered.

Sale and Standard Vehicle Details

Cash Price

The regulations require the supplier to state the cash price of the motor vehicle (including goods and services tax) except in the case of sales by auction or competitive tender.

Most buyers' expectation of the cash price is that this is the price they will have to pay to buy the vehicle and drive it away. They are often unaware this price may exclude what are referred to as additional "on road costs" (for instance, licensing the vehicle, or registering it in the case of a new import). This is potentially misleading for consumers.

The Ministry considers all information about the price of the vehicle should be provided in a manner which gives motor vehicle buyers a clear indication of the total cost of the vehicle.

Suggestions put forward in the review of the MVSA include:

• A cash price that conveys the total price
• An additional "on road costs" panel (similar to the inclusive or exclusive of GST approach for other products)
• That all costs involved in purchasing the vehicle and making it road worthy be placed in close proximity, so the buyer is able to see clearly that "cash price" does not include these costs. This would include information relating to registration or licensing, road user charges, and any money owing on the motor vehicle (i.e. any security interests over the vehicle).

For auction sales and competitive tenders, the SIN must state either "for sale by auction" or "for sale by competitive tender" in place of the cash price. No indication of price is allowed. Some industry participants find this too restrictive as many of their customers have indicated they would like an indication of the expected price range. Any additional charges payable in addition to the auction bid should be clearly indicated.

Security Interest

Section 15 of the MVSA and the SIN require disclosure of any security interest that is recorded on the Personal Property Securities Register (PPSR) or a statement as to the effect of non-disclosure. The disclosure must be consistent with the information recorded about the motor vehicle on the PPSR. On the SIN, the supplier must either state "there is a security interest registered over this motor vehicle" or leave the entry blank.

The importance of this information is not challenged. Motor vehicles are frequently used as a security interest. Every year there are more than 250,000 debts registered on vehicles. At any one time, there could be 255,000 debts hidden on past plates. In addition, each year there are 23,000 vehicles stolen and 55,000 vehicles sold illegally.[1] These figures suggest a large part of the used vehicle market involves the sale of vehicles with security interests.

Under the MVSA, if a motor vehicle trader fails to declare an existing security interest, then liability is vested back on the trader, and the buyer has free title to the vehicle. If the security interest is declared then the buyer takes on the liability and the vehicle could be repossessed. The Commerce Commission has reported one instance of failure to disclose a security interest and one claim before the Motor Vehicle Disputes Tribunal centred on this issue.

Comments made to the Ministry suggested the requirement to leave the security interest field blank when there is no recorded interest creates confusion. A buyer unfamiliar with the regulations may be unsure whether a registered security interest exists when the entry is left blank. One proposal is that the supplier be required to state either "there is a security interest registered over this motor vehicle" or "there is not a security interest registered over this motor vehicle" and remove from the regulations the option of leaving the entry blank.

Make and Model, Engine Capacity, and Operating Fuel Type

The SIN must state the make and model, engine capacity and operating fuel type of the motor vehicle as recorded on the motor vehicle register established under the Transport (Vehicle and Driver Registration and Licensing) Act 1986.

No need to change these information requirements has been identified. The vehicle make and model, engine capacity and operating fuel type help in assessing performance capability and relative value for the purchaser. For example, a buyer may be looking for specific design or safety features or performance attributes. This information is also used to source parts for vehicle repair and maintenance and may be significant in setting insurance premiums and the vehicle's resale value.

There appear to be no specific concerns about the manner in which this information is provided.

Vehicle Identification Number or Chassis Number

The SIN must state the vehicle identification number or chassis number.

No need to change these information requirements has been identified. These are important ways to identify the vehicle if it is stolen or a dispute arises. These identifiers may also be important in verifying the various date attributes (for example, model year or year of manufacture) of a particular vehicle in the future.

Date Attributes (Vehicle Year, Year of Manufacture and Year of First Registration)

The supplier must state the "vehicle year" of the motor vehicle as recorded on the motor vehicle register. "Vehicle year" is defined in the SIN as either the calendar year in which the vehicle was manufactured or the model year as designated by the manufacturer.

This definition is problematic because the motor vehicle register protocols are not compatible with the SIN requirements in relation to what can be entered as the "vehicle year" on the register. The register is run by Land Transport New Zealand, under delegation from the Ministry of Transport, and was designed as a register of all vehicles that can be used legally on New Zealand roads. Date attributes such as model year, year of manufacture and year of first registration are significant in terms of sale and resale value. They do not have the same significance in terms of simply registering the vehicle for lawful use.

Information collected during the pre-registration process for motor vehicles, and ultimately shown on the register, includes a field entitled "vehicle year". This is the entry which must be used in the SIN. Prior to 15 December 2003, there was no formal definition of "vehicle year" in legislation. Industry convention followed that the "year of first registration" (YOFR) was used where the "year of manufacture" (YOM) or "model year" (MY) could not be determined. Thus some motor vehicles entered onto the register before December 2003 may have any one of the three attributes (YOM, MY or YOFR) entered into the "vehicle year" field.

Since 2003, the register "vehicle year" entry for some vehicles has continued to allow YOFR, in part because YOM or MY data is more difficult to obtain and in part because the register requires a four numeral entry, cannot be left blank and does not allow "unknown" to be entered in this field.

This problem arises mainly with Japanese used imports due to difficulties in obtaining YOM or MY data from the Japanese motor industry. While the YOM or MY data can be determined from hard copy tables provided by the Japanese Automobile Manufacturers' Association (JAMA tables), the tables are extremely difficult to use and it is time consuming to extrapolate the data. Conversely, the YOFR data is readily available from the Japanese deregistration documentation that accompanies exports.

Technically, vehicles placed on the market following December 2003, may have an incorrect "vehicle year" entry in terms of the SIN "vehicle year" definition. The entry, however, may not be incorrect in terms of the requirements of the register at the time of being entered. Some "vehicle year" entries recorded on the register may therefore be in breach of the SIN requirements. While they do not meet the more limited two attribute definition, sellers must continue to use them because the SIN requires the data entered in this field to be as recorded on the register.

The use of the term "vehicle year" in the SIN needs to be reconsidered. Where certain terms are common to, and relied upon by, different administrative agencies, it is important the definition of those terms is consistent. Following is an explanation of each attribute.

• "Year of manufacture" is the date when a vehicle is assembled to the point that it can reasonably be expected that a consumer could purchase it. In a general sense, it is the date the vehicle came off the production line in a state ready for sale.
• "Model year" is the year designated by the manufacturer to a particular model when it is placed on the market. A model may be produced for periods of up to five years or more, and may be produced in the six-month period preceding its year indicator. That is, a model with a designated "model year" of 2006 may have been produced in late 2005 and may continue to be produced until 2010 or later.
• "Year of first registration" is the date that the vehicle was first registered for use. For imported used vehicles, this will be the date first registered overseas. For vehicles imported new to New Zealand, it will be the date registered in New Zealand.
• "Vehicle year" in regard to the Motor Vehicle Register is the year included in the vehicle descriptor and is the date attribute which appears on the registration or annual licence sticker on the vehicle windscreen. For most New Zealand-new vehicles this will be the model year; for imported used vehicles it will generally be either the model year or the year of first registration.

The above date attributes have differing significance to various sectors of interest.

Consumers

Consumers use a range of indicators to assess a vehicle's value. Information that acts as a reliable indicator of a vehicle's value includes age, price, use, design features and vehicle specifications (for example, engine capacity/configuration, safety features). Individually, these indicators may not allow the buyer to make a reliable assessment of the vehicle's value and in most instances one indicator alone is unlikely to be the sole factor in a purchase decision. However, when these indicators are brought together and weighed against each other, a judgement as to value can be made.

The YOM, MY and YOFR provide information about the vehicle's age and years of use. Together, these indicators ensure some certainty, whereas singly they are less reliable. For example, a significant difference between the YOM and YOFR dates could signal an "inventory" vehicle. "Inventory" vehicles may sit for significant periods of time after manufacture before being registered or exported. They may deteriorate while not being used if left in certain environments (for example, on a wharf and exposed to salt air).

Similarly, the YOFR may not always indicate the length of time a vehicle has been in use. Some motor vehicles may not have been registered when first used (for example, motor vehicles used in Japanese driving schools and vehicles imported from countries not requiring registration). For others, the full registration history may not be known (for example, used European luxury cars exported into one country and then re-exported to New Zealand). In these instances, a separate YOM entry provides a secondary indication of likely years of use. The MY date is useful only as a secondary indicator for the likely age and years of use of a vehicle. It has greater value as an indicator of specific model features.

For consumers, the YOM, MY and YOFR information is most useful when provided as separate pieces of information which collectively, and with other information such as the odometer reading and physical condition of the vehicle, can help them judge its value. YOM and YOFR are the more significant indicators in terms of value as an indicator of vehicle age and vehicle use.

Industry Participants

For industry participants, the respective values of YOM, MY and YOFR are less clear. As noted above, industry convention allowed these attributes to be used interchangeably for the purposes of motor vehicle registration before December 2003. This practice developed under quite a different vehicle market in New Zealand; most vehicles were New Zealand-new and the gap between YOM and YOFR was insignificant.

Anecdotal evidence suggests that, for suppliers, the date attributes may have significant individual value, or at the least may be ascribed individual value, in certain circumstances. For example, one consumer upgraded their used imported vehicle with the same trader from which it was purchased. At the time of the trade-in, they were informed the vehicle was in fact older than when it was first represented for sale. It had been displayed according to its model year as a 1997 model, but at the time of trade-in it was assessed as a 1995 model - the year of manufacture.

Similarly, there are instances where the "vehicle year" has been queried by insurance companies because it does not coincide with the vehicle data on which they assess the premium rate. Date attributes, therefore, can be used to manipulate vehicle value, generally to the detriment of consumers. An important factor for suppliers in determining which attributes should be disclosed will be that the information is available for all vehicles and that traders are not placed at a disadvantage if, for some reason beyond their control, they cannot provide the information.

Government Agencies

Motor vehicles are regulated for a range of reasons in New Zealand. First, they must meet certain vehicle standards for safety and environmental purposes. Second, they must be registered on the motor vehicle register for use on the road. The owner must maintain a current licence for the vehicle as well as a Warrant of Fitness.

Registration details are used by the relevant enforcement agencies with regard to motor vehicle user infringements (drink driving, speeding, parking etc), car theft, motor vehicle sales and consumer information compliance. Everyone who has a role in implementing and enforcing the various rules, and those who are presumed to benefit from those rules, needs to share a common understanding of the terms used. Inconsistency in the terms used not only gives rise to confusion; it provides an opportunity for data to be manipulated.

The Ministry of Transport recently advised that it has successfully trialled a conversion of the JAMA tables into a format that can be sorted electronically into alphabetical order which will provide a platform for web-based interrogation of the year of manufacture. This will facilitate the use of the JAMA tables so that YOM can be captured correctly. There will continue to be some cases where YOM or MY can not be determined but these instances will be relatively few. Other source documents may also be used to provide the necessary detail.

If the construction of an electronic version of the JAMA tables proves successful, the year of manufacture could be identified for almost all vehicles. Date of first registration would continue to be entered separately.

Conclusions

The incompatibility between the SIN and the motor vehicle register protocols needs to be addressed immediately. The current "vehicle year" definition in the SIN does not provide reliable information as to the age of the vehicle. Model year information is not a primary indicator of age and therefore its inclusion in this field compromises the usefulness of the data. Moreover, because the "vehicle year" entry must be "as recorded on the motor vehicle register", suppliers and the government are left at some risk where that information is incorrect (even though the information may have been entered in the manner required at the time of registration).

The Ministry proposes that the SIN regulations be amended to allow the vehicle descriptor to reflect the "vehicle year" date attribute on the Motor Vehicle Register. Separate entry fields for year of manufacture and year of first registration would be required on the SIN. YOM and YOFR data provide information about vehicle age and vehicle use respectively and therefore stand as useful counterpoints to each other. Where the year of manufacture is not available an entry of "unknown" could be made. Model year provides information about the vehicle's features and specifications and this could continue to be used in the description of make and model.

Actual Distance the Vehicle Has Travelled

The regulations require the correct distance the vehicle has travelled to be recorded on the SIN. If the correct data is not displayed, a statement noting the inability to determine the actual distance travelled must be made.

There is industry concern that the requirement to note solely the "actual distance the vehicle has travelled" is too strict for certain situations. They point out that there can be legitimate reasons why a vehicle's odometer reading may differ from the vehicle's true mileage. For example, the odometer may have gone around the clock or numbers may have been transposed in manually recording the odometer reading. They contend that, in such situations, a responsible motor vehicle trader is obliged to note on the SIN that the "vehicle odometer reading may be inaccurate" and that this is likely to give the buyer the impression the odometer has been tampered with. This could discourage them from buying what might have been a suitable vehicle.

Consumer and industry concerns regarding odometer tampering are widely documented. There are strict penalties for those who tamper with or misrepresent odometer readings. Consumer confidence that an odometer has not been tampered with is vital. Even though a vehicle's mechanical condition may provide a better indicator of its current and likely future capability, many buyers consider the odometer reading a significant indicator of a vehicle's condition and factor this information into their purchase decision.

The Ministry is not convinced the current requirements need to change. Any variation to the requirement to enter the actual distance travelled could create an avenue for misrepresenting this information. This risk is considered greater than any reason for relaxing the current requirement.

Vehicle Registration and Vehicle Licence

The supplier must indicate, by ticking the appropriate box, whether or not the motor vehicle is currently registered as required by Part 1 of the Transport (Vehicle and Driver Registration and Licensing) Act 1986. The supplier must also state the vehicle licence expiry date as recorded on the most recent licence (whether current or expired). If the vehicle has never been issued with a licence, the supplier leaves the entry blank.

Confusion has arisen as to the meanings of "registration" and "licence" and their placement together on the SIN. Registration, and the provision of registration plates, occurs when the motor vehicle is first added to the motor vehicle register. It is generally ongoing, although there are some circumstances in which a vehicle may be deregistered. Motor vehicle licensing is an annual obligation placed on the motor vehicle owner. This fee helps to pay for roading projects and road safety programmes and a card must be displayed in the bottom left corner of the windscreen to confirm current validity. Confusion arises in part because the public commonly refer to this licence as "registration".

It is common for registered vehicles to be auctioned without a current licence. This is particularly so for low value vehicles and where the seller is also a prospective buyer and does not want to pay two sets of licence fees. It is equally common for a newly imported used vehicle to be displayed for sale before it has been registered. A buyer, seeing the SIN has been ticked "yes" indicating the vehicle is registered, may assume the vehicle also has a current licence (even though the date of licence expiration may be noted in the same panel).

Consideration needs to be given to finding a way of avoiding possible confusion.

Options that have been put forward include:

• Separating the vehicle licence details from the vehicle registration details
• Requiring licence details only where the licence has expired or is due to expire within one month of sale
• Relying on the information already provided on the windscreen.
• Placing this information (or the associated costs) in close proximity to the cash price along with other possible road user charges.

A motor vehicle must be both registered and licensed before it can be legally used on the road. Many buyers will expect to be able to use their new purchase immediately and that the cash price includes all those costs required to enable this.

Registration Plate Number

The supplier must state the number or distinguishing mark on the registration plate of the vehicle as recorded on the motor vehicle register.

Warrant or Certificate of Fitness

The supplier is required to note on the SIN (by ticking "yes" or "no") whether the vehicle has a warrant or certificate of fitness (WoF). The actual expiry date must also be noted.

Industry representatives have commented that a WoF will often expire while a vehicle is being displayed for sale in a car yard or waiting for auction. This means the SIN must be updated and, in larger car yards, this can be an onerous compliance cost.

Under Land Transport Rules, the WoF must be displayed on the window screen of any motor vehicle. It is further required that a WoF be no more than 28 days old at point of sale. This is important consumer information about which the SIN is silent.

The current requirements relating to the WoF do not appear to be meeting the needs of either industry or consumers. The Transport Rules 28 day requirement lends weight to the potential importance of this information to consumers. Consideration therefore needs to be given to finding a more effective means of providing the relevant details and obligations that attach to the WoF.

Road User Charges Apply and Outstanding Road User Charges

The supplier must indicate (by ticking "yes" or "no") whether or not the vehicle is subject to road user charges under the Road User Charges Act 1977 and also whether or not there are any outstanding road user charges in relation to the vehicle. All diesel powered vehicles and vehicles over 3500kg are subject to road user charges. To pay the charges, you must buy a Road User Charge licence.

No need to change these requirements has been identified. These are additional costs the buyer needs to be aware of when making their purchasing decision. However, consideration could be given to requiring this information only for vehicles that require such a licence. It has also been suggested that this information would be better placed either in close proximity to the cash price and other additional cost information entries or to the entry disclosing operating fuel type.

Re-Registered Vehicle

The supplier must indicate (by ticking "yes" or "no") whether or not the motor vehicle has been previously registered and then re-registered as recorded on the motor vehicle register.

Re-registration is necessary if the vehicle's registration has been cancelled. Common reasons for cancelling registration are that the vehicle has been "written off" by an insurance company, rendered useless or destroyed, or having been unlicensed (and likely not used) for more than one year.

No need to change these requirements has been identified. This is important information about the history of the vehicle and goes some way to providing a level playing field with regard to the information on damage required for imported vehicles.

Information about Imported Used Vehicles

Year First Registered Overseas and Country Where Last Registered

The supplier must state the year the vehicle was first registered overseas as well as the country where it was last registered as recorded on the motor vehicle register.

No need to change these requirements has been identified. These are important indicators of the history of the vehicle.

Imported as a Damaged Vehicle

The SIN notice has an "imported as damaged vehicle" panel. Land Transport New Zealand records whether or not the vehicle had obvious structural damage or deterioration at the time of import and this is flagged to the vehicle. The extent of damage is not recorded.

The flag is useful in that it alerts the consumer to additional history of the car and will aid the purchase decision.

The industry viewpoint is that, as the flag does not identify whether the damage is (was) major or minor, it should not be used as a "definitive categorisation of the vehicle as structurally damaged or incorrectly repaired". The implication from industry is that consumers will not give proper consideration to cars with such a flag, believing the car to have sustained major damage when in fact the damage may have only required a simple repair.

A flag is retained on the motor vehicle register records only in the case of "obvious structural damage or deterioration of a vehicle". The key word here is "structural", as this determines whether the flag remains on the vehicle or not. Vehicles with damage that is not necessarily structural - such as a minor dent to a door panel - may be flagged initially, but the flag will be removed following subsequent inspection by a Land Transport New Zealand approved entry certifier. No information on the damage will be retained on the record and, therefore, will not be disclosed on the SIN.

The Ministry is not convinced the current requirements need to be changed. It is important for a buyer to know if a vehicle has a recorded history of structural damage. This information is available to some extent in the re-registration history of a vehicle which may have been damaged in New Zealand. While this paper acknowledges there is some debate as to whether the requirements for deregistering a motor vehicle for reasons of structural damage go far enough, it is not within the ambit of the consumer information regulations to resolve this issue.

Consumer Advice

Advice about Relevant Legislation

Information must be provided on the SIN about the MVSA, the Consumer Guarantees Act 1993, the Fair Trading Act 1983 and the Motor Vehicle Disputes Tribunal along with details on where to go to get detailed information.

The importance of this information for buyers has not been challenged. However, stipulating the precise information in the regulations, and in particular contact details, has given rise to difficulties when this information changes. Suppliers are placed in the untenable position of having to wait on changes in the regulations before they can provide updated information.

There are concerns within industry and consumer groups that, rather than informing consumers of their rights, the consumer protection information displayed on the SIN creates confusion. These concerns arise from the amount of information provided, the number of different agencies involved in administering and enforcing motor vehicle regulation, and the corresponding diverse range of contact points from which to seek redress. The way in which the information itself is presented is also seen as a problem (likened in comment to the Ministry to the "fine print" of a contract and thus largely ignored).

The following chapter explores different options for providing this information.

Explanatory Information about Standard Vehicle Details

This information is marked by asterisks on the front of the SIN and generally provides an explanation of the significance of the marked item and where to go for further information. It includes information on:

• Security interest
• Checking vehicle details
• Vehicle year
• Actual distance travelled
• Re-registered vehicle
• Outstanding road user charges
• Imported as damaged vehicle
• Buyer's responsibilities re change of ownership

Again, the value of this information to consumers is not in question. The same concerns arise, however, about maintaining its accuracy, the amount of information and the manner in which it is presented. These issues are explored in the following chapter.

It should be noted that section 15 of the MVSA contains a specific requirement for an explanatory statement about the effect of disclosing or not disclosing a registered security interest. Any new format developed will require such a statement.

Other Information

Features and Additional Information Facility

There is demand from traders and buyers for the SIN to include additional information, such as features and accessories and information about the number of owners. Currently, such information may not be included on the SIN, but may be supplied on a supplementary form.

When the SIN form was originally developed, the required vehicle details were limited to those that could be independently verified and were meaningful in regard to the basic performance attributes of the vehicle. There were concerns that sale features would be given greater prominence on the SIN and that this would detract from details that were more meaningful, even if less attractive, to the buyer.

There may be merit in allowing additional sales information on the SIN. It appears consumers value this information and are prepared to make their own judgements as to its merit. Concerns about the visibility of the prescribed information could be dealt with by a simple requirement that such information is given prominence and by limiting the space allocated to optional information.

Vehicle Fuel Efficiency

Vehicle fuel efficiency is increasingly becoming a point of interest for consumers. Information on vehicle fuel efficiency could be provided at point of sale.

Such information could convey the expected fuel consumption of the vehicle per year for a given distance compared with a fuel efficient vehicle. Consumers could then consider this information as part of the vehicle purchase.

The information could be drawn from the recently launched fuelsaver website, which would be modified to provide the required data.

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