Be wary of a car dealer’s offer of an extended warranty. Motor traders are legally obliged to give a warranty on a used car less than 10 years old which has travelled less than 160,000kms. Cars sold by auction are excluded from this warranty. Car dealers may avoid offering a warranty if they display a defect notice. Car buyers who incur a loss through a motor trader’s actions may seek compensation from the Motor Car Traders Guarantee Fund.
Motor car traders often offer “extended warranties” as part of a car sale. 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 such a warranty if you fully understand its terms and are certain that it will be worthwhile.
New car buyers must rely on the guarantee of the manufacturer or on other legal remedies (e.g. in contract or fair trading laws). See “Motor Car Traders’ Guarantee Fund”.
Private sellers do not give warranties. As is the case with new car purchases, if you buy a used car privately and something goes wrong with the car, you will have to rely on other legal remedies.
If you buy a used car from a motor car trader, the MCT Act requires the trader to give a warranty in certain circumstances (s 54); this warranty is different from any “extended warranty” that a 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 motor car trader will have to repair or make good the defect at their own expense so as to place the car in a reasonable condition having regard to its age.
The warranty applies if the car was manufactured not more than 10 years before the date of sale and has been driven for less than 160,000 km. The warranty period is 5,000 km or three months from when you take delivery of the car, whichever occurs first. Any period during which the trader has the car for the purposes of meeting warranty obligations does not get counted as part of the three-month warranty period.
If you suffer loss as a result of a trader failing to honour the warranty, you may make a claim to the Motor Car Traders’ Guarantee Fund for compensation (s 76 MCT Act).
What is excluded from the warranty?
If the car was manufactured more than 10 years before the date of sale or has been driven more than 160,000 km, then the 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 of the car 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 motor car trader;
•sale to another motor car trader or special trader; and
•sale by public auction.
The prescribed accessories of the car referred to in section 54 are: radios, cassette players, compact disc players, telephones, car aerials, clocks, cigarette lighters, non-standard body hardware, non-standard rear window demisters, tools other than jacks and wheel braces, light globes, sealed beam lights, non-standard fog lights, and non-standard alarms (reg 24 MCT Regulations).
The car will be 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, having regard to the likely age of the car 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 will not apply, the 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 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 trader must retain the notice for at least seven years, and must give you a copy of the notice as soon as possible after the sale (penalty: 50 pu) (ss 83A, 83C; reg 26).
What is the effect of a defect notice?
Under section 55 of the MCT Act, a motor 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:
1 the defect notice must be attached to the car at all material times;
2 a copy of the defect notice must be signed by the purchaser at or before the time of sale;
3 a true copy of the signed notice must be given to the purchaser upon the sale; and
4 the estimate of the cost of repairing the defects must be reasonable.
The trader must retain the defect notice for at least seven years, and must give you a copy of the defect notice as soon as possible after the sale (penalty: 50 pu) (ss 83A, 83C; reg 26).
Any special condition that purports to limit or modify the obligations of a motor car trader under section 54 or 55 is void (s 56). If a trader enters an agreement containing such a special condition, a penalty of 10 pu applies.
If you suffer loss as a result of a trader’s failure to comply with section 56, you may make a claim to the Motor Car Traders’ Guarantee Fund for compensation (s 76).
This fund is established under section 74 of the MCT Act. Section 76 provides that any person (not being a motor car trader, a special trader, a public statutory authority or a finance broker) may make a claim to the Secretary to the Motor Car Traders Claims Committee (established under s 57) against the fund in respect of loss incurred from a failure of the motor car trader to:
•comply with sections 36, 38, 43(3), 54(2A), 54(2C) and 56(2); or
•transfer good title to the car; or
•comply with an agreement to pay the purchase price to a person who sold a car to the 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 motor car; or
•pay transfer or registration fees or stamp duty, or provide a roadworthiness certificate or other document necessary to enable the car to be registered; or
•comply with an agreement to refund a deposit or other amount following termination of a contract to purchase a motor car; or
•deliver a motor car after payment of the purchase price; or
•remit money paid to the 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 the trader’s trading in motor cars.
Section 76(2) allows a special trader who is a financier to make a claim against the Fund for loss incurred from the failure of a motor 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 25 MCT Regulations). Further claims cannot then be made in respect of the same matter (s 78).
A person whose interests are affected by a Committee decision may apply to VCAT within 28 days of the day the decision was made or a requested statement of reasons for the decision is given (see s 79).