Is the warranty worthwhile?
Car traders often offer ‘extended warranties’ as part of car sales. You should be wary of such warranties, as they can be so limited in their application that they are not worth the price you pay for them. You should only buy an extended warranty if you fully understand its terms and are certain that it will be worthwhile.
New car buyers must rely on the manufacturer’s guarantee, or on other legal remedies (e.g. in contract or the Australian Consumer Law). See ‘Motor Car Traders’ Guarantee Fund’, below.
Private sellers do not give warranties. If you buy a used car privately and something goes wrong with the car, you have to rely on other legal remedies.
If you buy a used car from a car trader, the Motor Car Traders Act 1986 (Vic) (‘MCT Act’) (s 54) requires the car trader to give a warranty in certain circumstances; this warranty is different from any ‘extended warranty’ that a car trader may offer.
If a defect appears during the warranty period – whether or not it existed at the time you took delivery of the used car – the car trader has to repair or make good the defect at their own expense so the car is in a reasonable condition for its age.
The warranty applies if the car was manufactured no more than 10 years before the date of sale and has been driven for less than 160 000 km. The warranty period is 5000 km or three months from when you take delivery of the car, whichever occurs first. Any period during which the car trader has the car for the purposes of meeting warranty obligations does not count as part of the three-month warranty period.
If you suffer loss as a result of a car trader failing to honour the warranty, you may make a claim to the Motor Car Traders’ Guarantee Fund for compensation (s 76 MCT Act). This fund is administered by Consumer Affairs Victoria.
What is excluded from the warranty?
If a car was manufactured more than 10 years before the date of sale or has been driven more than 160 000 km, then a car trader is not obliged to give a warranty.
The following are also excluded from the statutory warranty under section 54 of the MCT Act:
- defects that are specified in defect notices under section 55;
- defects arising from, or incidental to, accidental damage to the car that occurred after taking delivery;
- defects arising from misuse or negligence on the part of the driver that occurred after taking delivery;
- defects occurring in the tyres, battery or any prescribed accessory (see below) of the car;
- sale of a commercial vehicle or motor cycle;
- sale to a person who had the car in possession or under control for a continuous period of not less than three months immediately before the sale;
- sale to an employee or related company of the car trader;
- sale to another car trader or special trader;
- sale by public auction.
The prescribed accessories of a car referred to in section 54 of the MCT Act are: radios, cassette players, compact disc players, telephones, car aerials, clocks, cigarette lighters, non-standard body hardware, power outlets, tools other than jacks and wheel braces, light globes, sealed beam lights, non-standard fog lights, non-standard alarms, digital video players, MP3 and MP4 players and docks, GPS systems, and non-standard keyless entry systems (reg 26 MCT Regulations).
A car is regarded as having a defect for the purposes of sections 54 and 55 of the MCT Act if one or more of its components is no longer in proper working condition, considering the car’s age or the number of kilometres it has travelled, or if the component is defective to the extent that the car is unroadworthy or is not able to be driven (s 54(10)).
If the section 54 warranty does not apply, the car trader must attach a notice to the car, stating that the car is sold without any obligation under the MCT Act to repair or make good any defects that the car may have (s 54(2C); reg 12). If you suffer any loss as a result of a car trader’s failure to attach such a notice to the car, you may make a claim to the Motor Car Traders’ Guarantee Fund to seek compensation for that loss (s 76). (The Motor Car Traders’ Guarantee Fund is administered by Consumer Affairs Victoria.)
The car trader must retain the notice for at least six years and must give the purchaser a copy of the notice as soon as possible after the sale (ss 83A, 83C; reg 30; penalty: 50 pu).
What is the effect of a defect notice?
Under section 55 of the MCT Act, a car trader may avoid the warranty provisions by fixing a notice (see reg 13 MCT Regulations) to the used car specifying in reasonable detail any defects believed to exist in the car, together with an estimate of the fair cost of repairing or making good each defect.
The following must also occur:
- the defect notice must be attached to the car at all times;
- a copy of the defect notice must be signed by the purchaser at or before the time of sale;
- a true copy of the signed notice must be given to the purchaser upon the sale; and
- the estimate of the cost of repairing the defects must be reasonable.
The car trader must retain the defect notice for at least six years and must give the purchaser a copy of the defect notice as soon as possible after the sale (ss 83A, 83C; reg 30; penalty: 50 pu).
Any special condition that purports to limit or modify the obligations of a car trader under section 54 or 55 is void (s 56). If a car trader enters an agreement containing such a special condition, a penalty of 10 pu applies.
If you suffer loss as a result of a car trader’s failure to comply with section 56, you may make a claim to the Motor Car Traders’ Guarantee Fund for compensation (s 76).
Motor Car Traders’ Guarantee Fund
The Motor Car Traders’ Guarantee Fund is established under section 74 of the MCT Act. It is administered by Consumer Affairs Victoria.
Under section 76, any person (who is not a car trader, a special trader, a public statutory authority or a finance broker) may make a claim to the secretary of the Motor Car Traders’ Claims Committee (established under s 57) for loss incurred from a failure of a car trader to:
- comply with sections 36, 38, 43(3), 54(2A), 54(2C) and 56(2) of the MCT Act; or
- transfer good title to a car; or
- comply with an agreement to pay the purchase price to a person who sold a car to the car trader or to remit the whole or any part of the purchase price to another person; or
- refund a deposit, or any other amount, following termination of a contract of sale of a car; or
- pay transfer or registration fees or stamp duty, or provide a roadworthiness certificate or other document necessary to enable a car to be registered; or
- comply with an agreement to refund a deposit or other amount following termination of a contract to purchase a car; or
- deliver a car after paying the purchase price; or
- remit money paid to the car trader as a premium or purchase price for an insurance policy or warranty to the person who was to provide the insurance or warranty; or
- satisfy a court or VCAT order arising from a car trader’s trading in cars.
Section 76(2) of the MCT Act allows a special trader who is a financier to make a claim against the fund for loss incurred from the failure of a car trader to procure the cancellation of a registered security interest in the car.
Successful claims of up to $40 000 can be paid (reg 28 MCT Regulations). Further claims cannot be made about the same matter (s 78 MCT Act).
A person whose interests are affected by a decision made by the Motor Car Traders’ Claims Committee can apply to VCAT within 28 days of the day the decision was made, or within 28 days of receiving a statement of reasons for the committee’s decision (statements are issued upon request) (see s 79 MCT Act).