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Trevor Collett | May, 21 2015 | 13 Comments

Tougher laws to protect the rights of new vehicle buyers in Australia, dubbed ‘lemon laws’, could be on the way.

Lemon laws already exist in some overseas markets, such as the US (since 1975), and some industry figures have been pushing for similar laws to be introduced in Australia.

Currently, the Australian Consumer Law (ACL) governs sales in the new car industry, but Federal Minister for Consumer Affairs Bruce Billson has revealed that the Australian Competition and Consumer Commission (ACCC) had been ordered to review the implementation and effectiveness of current laws.

The term “major failure” is detailed in the consumer law, and is designed to protect buyers who wouldn’t have purchased goods or services had they known the extent of future problems.

A problematic power window switch may not keep customers from a new model, as it could be easily rectified, whereas a model prone to ‘major’ engine failure would likely be avoided by most buyers.

Carmakers are obliged to fix problems within a reasonable timeframe, but if the problem cannot be satisfactorily repaired then the buyer is entitled to ‘terminate the contract’ and seek compensation (which could include minor items associated with the problem such as towing and accommodation).

However, anything classed as a ‘minor’ failure means the seller has the right to decide if they refund, replace or repair.

And it’s this clause that is the subject of proposed lemon laws, as most consumers could be forgiven for thinking that a carmaker will not replace a problematic purchase or provide compensation under any circumstances.

News Corp reports that no evidence exists of any owner being granted a replacement vehicle or a refund since the ACL came into effect in 2011.

New car warranties are not necessarily designed to protect consumers but rather attract their business. The now standard extended warranties from the likes of Citroen, Renault and Kia (the latter offering seven-year terms) in Australia reflect this, and the confidence carmakers have in their products.

Lemon laws, much like the ACL, would override any terms and conditions spelled out in new vehicle warranties, and give owners of ‘lemons’ the chance to walk away from cars that prove constantly problematic.

Such laws could also be attached to a guide that suggests what constitutes reasonable longevity for new cars, based on intended purpose, regardless of the warranty period. These guides already exist for some consumer electronics and whitegoods.

The Consumer Action Law Centre is proposing a term that defines lemons as “vehicles which have been repaired at least three times by the manufacturer or importer that are still defective - or if the vehicle is out of service for 20 or more days in total due to a defect”.

The ACCC says it is “increasingly concerned” over reports from consumers that new cars have not been up to scratch.

Consumer Action CEO Gerard Brody suggested the “onus of proof” that a vehicle is of satisfactory condition should be on the carmaker within the first six months of ownership - rather than the owner having to ‘prove’ that a vehicle is a lemon.

Federal Senator and member of the Motoring Enthusiasts Party, Ricky Muir, has declared his support for lemon laws, should he be asked to vote on them in the Upper House.

Speaking with News Corp, Senator Muir said he was willing to consider laws that offered “greater consumer protection for new car purchases and mechanical repairs”.

Carmakers may think twice about entering the Australian market in the future if lemon laws come to pass, as Australia is currently seen as ‘low risk’.

With a relatively small population, any problems requiring recalls in Australia will be on a much smaller scale than in markets such as the US and European Union, which attracts carmakers to our shores.

As such, Australia is now arguably the most competitive market in the world, with a flood of new carmakers entering the market in the last decade and more on the way (such as China’s JMC).

Watch this space.

MORE: ACCC Calls Out Carmakers On Capped-price Servicing Terms
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