We're having a chat today with legal aid Queensland consumer advocate Paul Holmes about some of the pitfalls and warning signs to watch out for when you're buying a new but used car.
So Paul, before we get started tell us about some of the types of calls you might get during the year about car purchases?
I think the most common one we get is where people have bought a car they drive it away and as they're driving away from the car yard, it will break down or it will break down within, say a week of purchase and quite understandably those consumers are very upset that the car has lasted all of about five minutes before they have to spend money on it.
The other classic that we see is when people buy a car privately the person they buy it from doesn't tell them that the car is secured against the loan and somebody knocks on their door a few months later saying they're repossessing the car.
So maybe now is the time to talk about the difference between buying a car a used car privately and use car through a car yard. Let's start with private.
If you're buying a used car privately. Have you got a checklist that perhaps people could consider?
Look the first thing I always say is get it inspected if they're not going to let you get it inspected, I'm concerned about what's there, that they don't want you to find.
I'm a very cautious person. I would do that even if there's the appropriate safety certificate issued because the only way you have complete peace of mind is if you go and get it checked out yourself.
The other important things to look at are make sure you check the market value because depending on the condition of the car and how many Ks (kilometres) it’s done, the price of the same make of a car and model of a car could vary by thousands of dollars.
The other thing to check and this goes a little bit to the loan problem I was talking about before – have a look at the Personal Property Securities register. It's a register that has a list of everybody that's got an interest in that car on it. So obviously if it's clear you're in the clear and it's just the owner who's got an interest in it, but let's say there's a bank name on there, that means the bank has that car as security against a loan, and so if you buy it, you're buying not a clear title. And there's a risk that the bank could come knocking on your door a few months later to try and take it.
How would you check that register
There is an online website. It's www.ppsr.gov.au you do have to pay a fee to do the search, but from memory, it's like under 20 bucks and to me spending that sort of money to give yourself peace of mind is well worth it.
With an independent report, how would you go about doing that?
I always recommend well-known people and the classic in Queensland is RACQ. They for years of offered for their members the ability to have evaluation done but failing that you might have a trusted mechanic or a trusted person who knows about cars who you'd get to go and do that report for you.
So, say the deals done and you’re happy with it, you've had all full ticks of approval, what do you have to do then?
Look the big one is to make sure the registration gets transferred. And so that unsurprisingly requires a chat with Department of Transport. The key bit about making sure that happens is it's not until that transfer happens that in reality, you've got that clear title and clear interest in the car and (The Department of) Transport and Main Roads of course is also interested because they then know where to send the rego to get their money for you having the car registered in the coming year as well.
So we've had a bit of a look at the checklist of things need to do if you're looking to buy a used car from a private seller. What are the pitfalls though?
Look there are a number of pitfalls that you need to be aware of when you're considering buying a car privately. The big one is when you're buying a used car there's no cooling-off period. Additionally, you don't have the protection of the consumer guarantees and those consumer guarantees look at things like when you buy in this case a car it must be of an acceptable quality. Now, what's an acceptable quality will differ if it's a new car you would expect that new car to last potentially for a couple of years without requiring any major repairs done to it. Whereas if it's an older car with say 300,000kms on it, you still should you still should be able to drive it away from the car yard and drive it successfully for a month, but you could reasonably be quite cranky if it breaks down when you're driving down the road after buying it from the car yard.
So those things are a bit harder sometimes for consumers to assess and it's always good to get some advice, if you're unsure from us at Legal Aid. The other thing about it is there's a risk you won't get clear title. And when I talk about clear title, we talked about the Personal Property Securities Register earlier.
And on that register if there's say a bank with an interest in the car when you buy the car that bank’s interest stays there and so you don't have the car owned in your own right, the bank also in a sense owns the car.
So, to be really specific here, does that mean that if somebody has a loan on that car and they haven't paid it, but you've bought that car, you are potentially responsible for that?
Well, it's not that you're responsible for the loan. What could happen though is if the person you bought the car from doesn't pay the loan. In theory the bank could come and repossess the car you bought because they had the ownership, well they had that security interest in the car. And the other thing about that is if things go wrong such as that, your recourse is to sue the person you bought it from, the private seller and depending on their assets and their income, it might well be very difficult to recover any money from them.
So you could be left without a car and without the money that you paid for it?
That is a risk. Yeah. Okay doesn't always happen, but we've certainly seen it happen.
If I bought a used car from a car yard, do I have better rights in this situation?
I would say yes. And the reason I would say yes is there is a number of protections both in our State legislation and Federally that protect you when you're buying a car from a car yard.
If I'm buying a car from a car yard and it's a licensed dealer, what am I entitled to do as far as checking it and ticking those various boxes.
So, the big one is you're allowed to test drive the vehicle.
But be very careful what you sign when you say your test driving a vehicle, because you're allowed to test drive it and occasionally in the past. We've heard stories where our car yard has required you to sign a contract before test-driving it. It's fine for you to say sign something saying yes, I'm taking this for a test drive, but make sure there's not anything more in there such as you committing to buy the car or anything like that. You don't have to commit to buy a car in order to take it for a test drive.
And if you sign that document are you also potentially signing for any damage that you might do if say somebody bumps into you?
Yeh potentially, but under the test-driving conditions that car should be ensured by the car yard and should be protected. So that's not so much for a risk in my view.
The other really important stuff is unlike that private car sale we were talking about you've, got a clear guarantee. You've also got a one business day cooling off period for second hand cars and I should be very clear here that cooling off period does not apply to new cars.
And the other trick that will happen in the cooling off period is they might try and get you to drive the car away. If you agreed to complete the sale and drive the car away, no more cooling off period, so be very, very careful about that.
The other big advantage if something goes wrong, is there's motor dealers legislation that was passed by our State Government and amongst other things is in certain circumstances when things go wrong, you've got access to what's called a claims fund that may provide you with some compensation if you lose money because the dealer’s done the wrong thing. That doesn't apply in all circumstances and all situations, but it's there and it provides some good protection.
So, there were some more changes relatively recently here in Queensland about buying a second-hand car from a car dealer, tell us about the “lemon law” changes?
So, a couple of years ago the Queensland Government introduced some changes that were designed to protect people when they buy a car and it's not of the appropriate standard and when we're talking lemon laws, I liken it to when the car spends more time in the garage or car repairer getting fixed, than it actually does on the road and adding to that recently in addition to the fact that you can go to QCAT (Queensland Civil and Administrative Tribunal) over a motor vehicle dispute for up to $100,000, the Federal Government has changed the Australian consumer law as well and it’s amended one section that deals with minor and major defects. So previously one of the problems with accessing help regarding a lemon car is proving that so many minor defects actually made a major defect which is starting to get a bit jargony, but it's essentially if you've got some constant problems with the car, you're entitled to say this car as a lemon. That's what it's designed to do and that change helps that because you no longer have to argue that 10 minor defects makes a major defect, this legislation really clearly sets out the number of defects and the type of defects it takes for you to be able to say this is a lemon.
But lemon laws don't apply to private sale?
No they don’t.
So, should I still get an independent check done before I buy a car from a car yard then?/p>
I'm a lawyer. I'm risk-averse. I'm always going to say get an independent check because that way, you know, you've done everything possible to make sure what you're purchasing is of an appropriate standard.
What do I need to watch out for then if I'm buying a used car from a car yard?
I think over the years we've probably all seen the (A) Current Affair horror stories around odometers being fixed, fiddled with to reduce the kilometres.
There are also stories of, as we touched on earlier, people getting the car out of the car yard and it literally breaking down in the gutter a hundred meters down the road. Most of those problems you can address by getting an independent person to look at it because and this is the risk averse lawyer saying again, I'm more likely to trust somebody I've spent a little bit of money on to go and get something checked because I know who they are and I know what their reputation’s like.
Most car yards are fine, but the problem is as consumers. it's very difficult for us to identify which car yards are not doing the right thing. And so the way to protect yourself there is to take these steps such as the independent check.
When it comes to contracts give some tips there.
The biggest one is if your husband / wife / partner or significant other is at the car yard with you and they ask you “Just sign so I can get the loan, you won't have to pay any of it.” Be very careful there because the classic one there is if they could afford the loan they wouldn't need you to sign as well and the chances of them are not paying is of great risk to you because either you're being signed up as a joint borrower to the loan, in which case you're what's called jointly and severally liable for the loan, which means you could potentially have to pay at all, or you might be being signed up as a guarantor loan, which means if the other person doesn't pay, the finance company can chase you for the full amount of the loan as well.
The other classic that happens a lot is they just want you to put a hold on the car so nobody else can buy it. Be very careful of those contracts because they often have more in them than you just putting a hold on the car.
And then the other one is there are many car yards out there that will keep you there for a long time and it wears you down being in the same place for hours on end. And we have had cases where people have signed a contract just so they can get out. If you feel like that, don't sign anything – it’s okay to walk away.
But that's just dealing with the car. Don't get me started on the finance. We're all keen to get a car and when we want a car and we see something we like, we’ll do almost anything to have it there and then. And add a bit of pressure too from sales people. Yep. Salespeople are excellent at their job. No question about that. So the hard bit is taking the time to find a finance deal that’s actually suitable for you. There are a lot of car yards that will have an in car yard finance person and my experience of the loans that those in car yard finance people can offer is that they tend to be far more expensive and have higher interest rates and often higher fees than if you had a chat with your local bank and found out what they could offer.
There is nothing and no restrictions on you from saying to the car yard, “Look, don't want to sign up now, want to go and investigate what my best options are for finance”, or alternatively, before you go to the car pop into your bank and say, “Look I’m looking at buying a car, what's the most you think I can borrow? What interest rate you're going to charge me?” Because then at least you know, what's affordable for you, you know what the best deals are and you don't end up paying more than you have to when you're getting that finance loan.
And the final thing to watch out for and I'll be honest, this drives me crazy, is insurance. It's an absolute must I think to have insurance that protects the car and there are various things there from third-party insurance to comprehensive that is designed to either protect you, your car, or anybody else's car, or their body that you might hit in a car accident.
Where I struggle with and where a lot of people struggle with, is they're often signed up to a lot more insurance when they buy a car and we call it add-on insurance and over the past two years ASIC has ensured that companies offering add-on insurance have paid back literally over a hundred million dollars to consumers in insurance that ASIC believes, and I believe too, people should not have been signed up for.
There’s scaremongering in action.
Yeah and look the classic ones are consumer credit insurance. There are extended warranties, there is shortfall insurance, there is tyre and rim insurance, that like we could spend minutes me listing all these insurance and generally speaking, they're not needed or they don't provide a benefit to the consumer and the classic is consumer credit insurance and over the years I've seen pensioners signed up to consumer credit insurance. What is it? Generally speaking, what it does is it protects you by being able to pay your loan while you're unemployed. Now the problem with that for pensioners on the pension is they were never employed in the first place and so they can't access it.
Similarly, extended warranties – we were talking before about the Australian consumer law and the consumer guarantees under there. Often those extended warranties that you're paying hundreds of dollars for give you no more rights than you get for free under the Australian consumer law. So it pays to check whenever you signing a car contract or a finance contract, what are these extras that they've added and do I actually need them? And if the answer is no, get them taken off because the worst thing you can do is get a dodgy insurance and then be paying interest on it because it's part of your loan and the Consumer Action Law Centre has a really great Demand a Refund website, go back and have a look at your loans and see insurance that you didn't know you had, or you don't think was ever going to be of any use, to demand those premiums that you’ve paid back from the insurer. I highly recommend having a look at that website.
So say you end up buying that car from the caryard that you liked and you're pleased with that process, what happens if something goes wrong afterwards? What can you do?
The first step is always to complain to the motor dealer and see if they're able to resolve your complaint without you having to take it any further. Office of Fair Trading also offers what's essentially a mediation service between yourself and the service provider.
Is there any time limit on any of this?
I always recommend doing it as soon as possible because the longer you leave it the harder it is to prove that if say in the case of the car not being roadworthy, that the car yard ought to have known that it wasn't roadworthy. If talking to the motor dealer or seeking help from the Office of Fair Trading doesn't work, then your next step is to take the matter to the Queensland Civil and Administrative Tribunal which is a mouthful and why I always end up calling it QCAT. QCAT has a jurisdiction for motor vehicle disputes of up to $100,000 and it will look at the entirety of the circumstances and make a call about whether or not you as a consumer were sold a car of the appropriate standard. When you're going to QCAT it's always good and always adds to your case if you've got an independent mechanic who's able to comment on not only what the damage was or is, but also when they think it should have been apparent to an appropriately qualified person because if it should have been apparent to somebody before the car was sold, then that's a good argument for you. But if it's something that could only have been picked up after the car was sold, that weakens your case.
And if that fails then are there any further options for you?
If you lose a case in QCAT you have rights of appeal to court, but the reality is for most of us buying second-hand cars, we don't have the thousands of dollars it would take to progress matters to the District, Supreme, or Magistrate's Court, depending on where it needs to go.
If people need advice when they're going through this process, where can they go to?
I always recommend our first port of call should be the Legal Aid Call Centre whose number is 1300 65 11 88 because we have some excellent client information officers there who can direct you to either the appropriate section in Legal Aid, which will often be the consumer protection unit, or a Community Legal Centre.