With energy prices rising, switch to a cheaper plan
Compare Prices Now

Bought a lemon car? Know your consumer rights

See how to launch a consumer complaint if you're stuck with a lemon car

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

A lemon car is often hidden in dealerships and classifieds, waiting for an unsuspecting buyer to drive away.

At times, just days after purchase, repairs and breakdowns can make it a very expensive deal. A recent report has shown that this is incredibly common.

Australians are entitled to consumer protection and free repairs or replacements under the Australian law. But many dealers are brushing them off and denying them their consumer rights.

This guide takes you through the details uncovered by the report, and what you can do if you’ve bought a junker without knowing it.

How much do new car problems cost?

The cost of buying a lemon is high, in both time and money.

  • $858: The average direct cost of fixing new car problems
  • 31 hours: The average amount of time spent trying to fix the problem
  • $1,295.25: The total average cost of fixing new car problems, factoring in both time and money
A recent Choice consumer survey found that most Australians have had car problems within just five years of buying, and that many may have unknowingly driven away in lemons.

Are there any brands that are worse than others?

Cars from all manufacturers have problems, and no single brand stands out as being considerably worse.

  • 68% of people who bought a Holden had problems within five years of buying. This was the most problematic brand.
  • 44% of people who bought a Mazda had issues. This was the least problematic brand.

Most of these problems were minor. Only 14% of new car buyers, across all brands, had problems that either seriously impaired operation or left the car entirely unusable.

What kind of car problems are people having?

Some parts of cars are more prone to issues than others. In-car technology, electronics and engine problems are the main culprits.

If you really don’t want to run the risk of new car troubles you can keep things simple by avoiding in-car electronics, keeping aftermarket additions to a minimum and giving the car a thorough check before buying. Car problems also encompass issues not disclosed by the seller. If you’re buying a car privately, it’s worth considering the most common issues that arise.

  • Undisclosed accident damage: Sellers don’t always disclose previous accident damage, and sometimes repairs are strictly cosmetic. This can have a significant impact on whether you’ll need to make unexpected repairs shortly after buying a used car.
  • Odometer fraud: Unscrupulous sellers might roll back the odometer to make it look like the car is less used than it actually is. One of the ways to spot this is by comparing the odometer against the car’s service record, but inconsistencies between the odometer and car wear and tear can also be a giveaway.
  • Not providing all documentation: About 1% of buyers had problems with sellers failing to provide all required documentation.

What happens when you take car problems to a dealer?

Choosing one manufacturer over the other won’t do a lot to improve your odds of avoiding car problems. Instead, you might try focusing on making sure you’re able to get it repaired with minimal hassle, and ideally for free, if something goes wrong. The problem is that not all customer service is created equal.
  • 50% of people who went to their dealers with car problems were only somewhat satisfied with the response
  • 36% of new car owners were very satisfied with their dealer’s response to problems
  • 24% of new car owners were dissatisfied with their dealer’s response to problems

Most buyers were very happy, or at least somewhat satisfied, with their dealer’s response to car problems. However, about a quarter of people had a very different experience, and many of them reported that their car dealers were using the same dirty tricks to avoid acknowledging problems until the warranty expired.

What they say"It's nothing to worry about.""The problem will fix itself.""Trust us. We're professionals."
What it meansAnother delaying strategy. Some customers have even been told that serious issues like an inaccurate speedometer are “common to all cars” or just “a small problem”.Customers are being told that they just need some time to get the feel of the car, or that different parts need to “settle in”. These delaying tactics are commonly reported ways for dealers to hold out until the warranty has expired.More Australians are left very satisfied than dissatisfied by car dealers, and odds are you have a reliable and trustworthy provider. However, the survey has shown that this is unfortunately not the case at least a quarter of the time.

What’s the best way to fix new car problems?

Whether or not a faulty car gets fixed often comes down to how determined the customer is; in many cases, the trick is to keep pushing even if a dealer initially turns you down or starts using delaying tactics to run the warranty out.
  • 94% of people with new car problems look for a solution, and 73% are satisfied with the response they get.
  • 67% of people who look for solutions go to their car dealer first.
  • 15% of those who go to car dealers are unable to resolve the problem. There’s a gender difference here, with women marginally less likely than men (13% to 17%) to have the problem solved.
  • 16% of people with new car problems were asked to, or did, sign a non-disclosure agreement as a condition of the repairs.

One of the most important facts to consider is that most of the new cars with problems (more than 70%) were covered fully or partially by the warranty.

Free repairs, free replacements: Your consumer rights

If you’re having problems with a new car you bought from a dealer, you are probably entitled to free repairs, replacements or a refund under Australian law. If you buy something in Australia that’s covered by a consumer guarantee it means you are entitled to a refund or repair replacement if it doesn’t work as it should.

  • All vehicles purchased from a dealer for personal or household use are covered by consumer guarantees.
  • Vehicles purchased for business use are covered, as long as they are mainly used to transport goods.

More specifically, a car must be able to:

  • Do what the dealer says it can
  • Meet any promises of performance, quality, lifespan or condition
  • Not come with hidden costs or other expenses

If it doesn’t, then you may be entitled to repairs, a replacement or a refund from the retailer (the car dealer).

  • In case of inherent manufacturing defects, you may be entitled to compensation from the manufacturer.
  • You are also covered by the terms of any currently applicable warranty.
  • Comprehensive car insurance can pay the cost of many forms of vehicle damage, even when it’s no longer a new car, or any specific defect.

I’m having car troubles. Can I get repairs, a replacement or a refund?

If you are having unreasonable issues with a new car, had no reason to expect that you’d be having those issues and these problems are interfering with the actual functioning of the vehicle or its features, then you are probably entitled to compensation.

  • The retailer cannot tell you to go to the manufacturer. Satisfying the terms of the consumer guarantee is the car dealer’s responsibility.
  • They cannot force you to sign a non-disclosure agreement as part of the terms. If you are covered by the consumer guarantees then you are covered, and the dealer cannot insert their own terms and conditions.
  • Consumer guarantee laws do not apply if you changed your mind or are just generally dissatisfied. There must be a clear problem with your new car.
  • If the dealer has unjustifiably said no you may launch a consumer complaint.

How to launch a consumer complaint

  • Contact the seller. Explain precisely how they’ve dropped the ball and exactly why you’re entitled to a refund, repair or replacement.
  • If they decline, contact the Australian Competition & Consumer Commission to find out who to get in touch with next. Depending on the situation it might be an industry body, state agency or other group.
  • If all else fails, you can take legal action.

Picture: Shutterstock

More guides on Finder

  • Stratton Finance Used Car Loan

    A used car loan with high borrowing amounts and both secured and unsecured options.

  • CarClarity Car Loan

    Find the best car loan for your circumstances with CarClarity. Rates start from just 3.35% p.a. and borrowers can apply for loans from $10,000 to $250,000 for new and used cars.

  • Great Southern Bank Fixed Rate Car Loan

    If you’re in the market for a new car, the Great Southern Bank Fixed Rate Car Loan may be able to give you the funds you need. With the security of a fixed rate and flexible repayments, this loan might be what you need to own your new set of wheels.

  • Car loan statistics 2021

    Finder research shows 2.7 million Australians have a car loan. Find out how much Aussies are borrowing, and how this has changed over time.

  • Alex Car Loan

    Opt for an Alex car loan and receive a personalised interest rate from 6.95% to 19.99%. Alex's car loans have no ongoing fees and are available from $2,100 to $30,000.

  • Toyota RAV4 car loans

    Compare car loans and discover prices and specs of the Toyota RAV4.

  • Stratton Finance caravan loan review

    Apply for a caravan loan with finance broker Stratton Finance and receive an interest rate from 5.49% p.a.

  • Stratton Finance boat loan review

    Stratton Finance's boat loans range from $10,000 to $200,000 with rates from 5.99% p.a. Secured and unsecured options available.

  • OurMoneyMarket Car Loan

    Get a loan for a new or used vehicle from $2,001 to $75,000. Rates start at just 5.35% p.a. and loan terms vary from 1 to 7 years.

  • Upcoming hybrid and electric car comparison

    Compare soon-to-launch electric and hybrid cars.

Car Loan Offers

Important Information*
Logo for IMB New Car Loan
IMB New Car Loan

You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

Logo for Beyond Bank Low Rate Car Loan "Special Offer"
Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

Logo for RACV New Car Loans
RACV New Car Loans

You'll receive a fixed rate from 5.99% p.a.
A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.

Logo for NRMA New Car Loan
NRMA New Car Loan

You'll receive a fixed rate of 5.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site