Owners of 'lemon' cars are struggling to use their consumer rights to end nightmare

Two-thirds of new car buyers have experienced problems with their vehicles in the first five years of use, with some struggling to use their legal rights to a repair, refund or replacement.

A Choice survey found while most affected owners were able to get their car fixed, an "alarming" 15 per cent were unable to resolve the problem, despite warranties, insurance and consumer guarantees to repair, refund or exchange if a product is not of an acceptable quality.

CHOICE: Consumers are being 'gagged'

CHOICE Magazine's CEO Alan Kirkland says consumers should not be required to sign a nondisclosure agreement when making warranty claims against car dealers

Further, when owners were forced to pay for repairs, it cost them $1295 in direct fees and lost wages, and 31 hours.

"While some companies are doing the right thing, others are treating consumers' statutory rights as an optional extra," said Choice's chief executive, Alan Kirkland.

Holden Commodore SS-V Redline.
Holden Commodore SS-V Redline. Photo: Supplied

"The research findings convey the very real sense that car companies are off-loading sub-standard new cars on consumers and then using lawyers to fight consumers, forcing them to pay more to have their new cars fixed."

Choice also found 16 per cent of new car owners with problems were forced to sign a confidentiality agreement in order to obtain a remedy, banning them from telling anyone about their experience.

Mr Kirkland accused car companies of attempting to cover up the scale of problems with new cars.

"It's astonishing. The problem is an owner might start thinking it's isolated and not rife across the industry," he said.

If a problem with a new car is a major one, customers can pursue a refund or replacement.
If a problem with a new car is a major one, customers can pursue a refund or replacement. Photo: Jay Cronan

"This information should be in the public domain, available to consumers and regulators, and it's time this power imbalance was addressed."

When it came to complaints, the findings showed Holden was the worst performing car company, with 68 per cent of Holden owners experiencing problems with their new car, followed by Ford and Audi.

No car brand had a problem car rate of less than 44 per cent.

Greg Patten, chief executive of Motor Traders Association of NSW, which represents dealers, said the industry took warranty complaints very seriously and fixing problems properly and quickly was their "lifeblood".

He said in cases where there were confidentiality agreements, the consumer most likely had exhausted all options with manufacturers, fair trading agencies, lawyers, and were willing to sign an agreement.

"It would be worrying if consumers are immediately going to the dealer or manufacturer and signing a confidentiality agreement to get a warranty problem fixed, because that would mean all the advertising done about consumer rights has completely missed its mark."

While acknowledging the poor results, a Holden spokesman said it had improved customer service by proactively calling customers with multiple warranty cases, by being "very active" on social media, and by educating dealers.

"This is clearly an industry-wide area that requires attention and is often driven by the increasing complexity of modern vehicles and vehicle interaction with mobile devices," said Holden's Sean Poppitt.

"Non-disclosure agreements are certainly not standard practise for Holden for any warranty or product issue. In some individual cases where issues are raised outside of warranty, resolution agreements are documented for clarity."

Choice's research comes ahead of the review of the ACL this year, but a group of aggrieved car owners, LemonLaws4Aus, says existing laws are inadequate and national "lemon" laws should be introduced.

The proposed lemon laws, in general, imposes limits on the number to times a supplier can attempt to repair a defect in a vehicle before the buyer can ask for a refund or replacement.

The Consumer Action Law Centre supports the call for lemon laws, saying it has seen a large number of lemon car owners fail to achieve a satisfactory remedy despite the ACL.

In a submission to the Queensland government's inquiry into lemon cars and laws, it proposed a definition of "lemon" as a car that "has been repaired at least three times by the manufacturer or importer and the vehicle still has a defect or if the vehicle is out of service for 20 or more days in total due to a defect".

Mr Patten said existing laws adequately protected consumers.

"A new motor vehicle is a complex piece of machinery with tens of thousands of moving parts, some may fail, but there's a whole system to provide service and repair under warranty," he said.

"Where a vehicle has repetitive problems, which is a small number overall, it would be unusual the current laws don't adequately cover any situation that arises."

But Mr Kirkland said warranties sometimes confused consumers, making them think after it had  expired that they couldn't pursue repairs and other remedies.

In his priorities speech for 2016, Rod Sims, chairman of the Australian Competition and Consumer Commission, urged car companies to invest in after-sales car care, following its investigation of Fiat Chrysler, owner of Jeep.

"The consumer guarantees ... are not limited by a manufacturer's warranty and blanket refusals to consider warranty claims after the expiry of a manufacturer's warranty or solely through the strict conditions of those warranties will be of concern to us."

The Choice report also said some consumers found it difficult to convince dealers to acknowledge there was a problem with their new cars. Others reported that dealers appeared to deliberately avoid acknowledging problems existed until after dealer warranty periods expired.

The Australian Automotive Dealer Association was unable to provide a response, but pointed to its submission to the Queensland government's inquiry, which said the case was yet to be made for national lemon laws.

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