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Buying a motor vehicle

19 Aug 2016 - 11:38 | Version 12 |

Contributed by CathyHe and Sandra Otto and current to 1 May 2016

Buying a motor vehicle is a big step and it can be tricky, especially if you're buying a used or second-hand vehicle. There are pitfalls to trap the inexperienced, but with a little knowledge, they can be avoided. A person who is considering buying a motor vehicle should be aware of their rights and obligations under the contract of sale.

Several separate areas of law govern the purchase of motor vehicles. A list of these Acts and their abbreviations is at the beginning of this chapter (see Contracts and consumer protection ).

When buying privately or at auction, a purchaser should remember the old adage of 'buyer beware'. A purchaser can check the ownership and title of the vehicle, but there is little legislative protection for private sales.

Motor vehicle dealers are subject to more regulation. The provisions of the Australian Consumer Law located under schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL), Sale of Goods Act 1972 (NT) (SOGA) and the Consumer Affairs and Fair Trading Act 1990 (NT) (CAFTA) apply to sales by traders. A special part of the latter Act concentrates exclusively on motor vehicle dealers [CAFTA Pt 10]. These legislative provisions regulate a dealer's behaviour in making the sale, the type of contract to be used, warranties that apply to the repair of certain defects in a vehicle and the general quality of a vehicle. The consumer may also rely on any relevant rights under common law. The Department of Business manages all functions relating to CAFTA Part 10, therefore any queries should be directed to that Department.

Buying a used motor vehicle

Buying a used motor vehicle privately

Before buying a registered, used vehicle from a person or organisation other than a motor vehicle dealer (see Buying from a dealer, this section), a purchaser should check:
  • for mechanical defects
  • whether the vehicle is stolen
  • whether any money is owing on it

In the NT registered vehicles don't have to be sold with a current roadworthy certificate, so it is advisable to have a vehicle checked for mechanical defects. A purchaser will be able to rely on express and implied warranties that bind sellers under the legislation (see Contracts and consumer protection ). If a vehicle is bought unregistered, the new owner can drive it on the street, but only to go to the Motor Vehicle Registry (MVR) for registration [Motor Vehicles Act (NT) s107].

Sound advice

* All documents relating to the purchase should be read before they are signed. A buyer can ask to take documents home for a day or two, so that points can be clarified and questions discussed with a trusted third party. A car dealer should always allow this.

Checking ownership

The certificate of registration issued by the MVR details the owner's name and address, a brief description of the car, together with its registration number and engine number, and the date to which the vehicle is registered. Where the vehicle is purchased from someone other than a licensed motor vehicle dealer, the purchaser should check that the vendor (seller) is the registered owner or has the owner's authority to sell the car by requesting identification or the owner's written authority.

The purchaser of a stolen vehicle is likely to be compelled to return the vehicle to its rightful owner and may have problems recovering the money they paid for the car.

Money owing?

Aside from validating the vehicle's ownership, a prospective purchaser should find out whether the vehicles acts as a security for money being owed to a creditor, such as a loan, hire purchase agreement or lease. If there is, the title to the goods is said to be encumbered and the vehicle can't legitimately be sold without this issue being resolved.

The Personal Property Securities Register (PPSR), formerly REVS, is a national online register which details security interests in personal property, including vehicles. A prospective buyer can search the PPSR to find out if anyone, apart from the vendor, has a claim over a vehicle (see Contact points ). Any claim must be satisfied before a buyer can obtain a clear title to the vehicle.

A buyer can check if a vehicle is encumbered by doing a Motor Vehicle Search online at www.ppsr.gov.au. A small fee applies. The search requires a person to answer a question about when the vehicle was manufactured and enter the VIN/chassis number. The person will then receive a search certificate which can be emailed to them.

The search certificate also contains information supplied by the state government authorities about whether the vehicle has been reported stolen or has been written off. However, it should be noted that the accuracy of the Register is only as good as the information supplied to it. That is, it can only supply information about thefts that have been reported to police and write-offs that have been reported to the insurer.

Transferring ownership

After a sale, a buyer is required to complete an Application to Transfer; the vendor completes the Notice of Disposal. These forms transfer liability for any future traffic fines or offences. Both are reproduced on the reverse side of the Certificate of Registration and can also be obtained from the MVR. A transfer fee of $15 and stamp duty of 3% of the vehicle's purchase price are payable. A purchaser must transfer registration within 14 days from the date of sale. If the registration is not transferred, agencies such as NT Consumer Affairs may not be able to assist in the event of a warranty problem.

Buying from a dealer

Part 10 of the CAFTA regulates the activities of motor vehicle dealers. A dealer is defined as a person who buys, sells and exchanges motor vehicles as a business. This definition encompasses trade-ins.

A person who sells four or more motor vehicles in a period of 12 months is presumed to be in the business of selling motor vehicles. Financiers and people in business who buy motor vehicles solely for demolishing and dismantling ('wreckers') are not considered to be dealers.

A dealer is required to sell a vehicle in a condition fit for registration [CAFTA s165], unless both parties exclude this requirement in the contract by using a particular form, Form 11. Dealers hold copies of this form. A dealer can't sell or offer a motor vehicle for sale if it is registered in a place other than the NT or has interstate number plates.

A dealer must be licensed and operate from a premises specified in the licence. Licences are available from the NT Department of Business (see Contact points ). The Department of Business delegate can refuse to issue a licence if the applicant:
  • appears to have insufficient resources to carry on a business
  • is unlikely to carry on business honestly and fairly
  • is not a fit and proper person to hold a licence
  • is bankrupt

An applicant must place a notice of the application in the daily newspaper. Any member of the public can object to the granting of a licence by lodging a notice in writing to the Department of Business within 14 days from the date of the advertisement.

A dealer has to display their name, place of business and licence number at their place of business. This information must also be contained in any advertisement.

A dealer must also maintain a register of their dealings in motor vehicles. The register must contain information about every vehicle bought and sold, including registration, engine number, odometer reading and on which date and from whom the vehicle was acquired.

A dealer is required to use a standard form when buying or selling a vehicle and to provide certain after sales warranty services. The ACL also prohibit false or misleading statements and deceptive conduct, and provides guarantees with respect to goods sold (see Contracts and consumer protection, this chapter 7.1).

NT Consumer Affairs (NTCA) provides consumers with information regarding standard contracts and how to enforce warranties (see Contact points ).

Contract of sale

A dealer must use a standard written contract (Form 10) when selling a used car [CAFTA s160]. The contract of sale has to include all material particulars, with all irrelevant information deleted, before it can be given to the purchaser to sign. A buyer who is unsure about the document being used by a dealer should take it into the Department of Business to have it checked. Remember a contract is a legally binding document and once signed, provides agreement to purchase the vehicle. If a change of mind occurs, any deposit paid may be lost.

A dealer who uses or tries to use a non-standard contract to sell a vehicle is guilty of an offence and liable for a fine of up to $76,500 for an individual or $382,500 for a body corporate. Any such incident should be reported to the Department of Business or NTCA. The purchaser can rescind (cancel) such a contract within three months of signing it by giving a written notice to the dealer. The dealer has to refund any payment and return any trade-in given by the purchaser under the contract. Similarly, the purchaser must return or refund to the dealer the vehicle or its value at the date of the contract. If the value of the vehicle or a trade-in has depreciated due to a lack of reasonable care by either party, the party at fault must compensate the other for the difference.

Warranties

The CAFTA provides for statutory warranties that apply to used cars purchased from licensed motor vehicle dealers [Part 10 ss168-173]. However, it is also important to remember that conditions and warranties implied by the ACL and SOGA also apply.

Warranties take the form of a dealer's obligation to repair certain defects in the car (for example, the radiator breaks down within the warranty period due to a mechanical fault) including any defects that existed or potentially existed at the time of the sale, subject to some exclusions. The dealer is liable to repair the defect and must offer the vehicle in a reasonable condition given its age and the distance it has travelled.

The warranty only applies if the defect appeared or occurred before the vehicle had been driven 5,000 km (motorcycles cannot be more than five years old) after being sold or within three months from the date the buyer took possession, whichever is earlier [CAFTA s168], and any of the following scenarios applies:
  • the vehicle was sold otherwise than as a second-hand vehicle and the dealer represented it as a demonstration vehicle, and the defect occurred before the warranty expired
  • the vehicle was sold subject to an unexpired manufacturer's warranty and the defect occurred before it expired
  • the vehicle was sold within ten years of being made and had at the time of the sale been driven less than 160,000 km (30,000km in the case of a motorcycle).

The three month period referred to above excludes any period the vehicle was with the dealer, or a person acting on their behalf, being repaired for a fault covered by the warranty [CAFTA s171(1)].

A dealer is excluded from the duty to repair a car they have sold if:
  • the defects were caused by damage done to the vehicle, either accidentally or maliciously, while it was in the buyer's possession
  • the defects arose because the vehicle was misused or driven negligently after the buyer had taken delivery
  • the defects arose because the vehicle was used for motor racing or rallying after the purchaser had taken delivery
  • the defects arose from superficial damage, such as to the vehicle's body, paintwork or upholstery, that would have been apparent upon a reasonable inspection of the vehicle carried out when it was sold or delivered to the buyer
  • the defects occurred in an accessory that didn't come with the vehicle when it was made
  • the contract of sale expressly states that the warranty provided by s 168 of CAFTA does not apply. This exclusion clause in a contract can only operate if, at the time of signing the contract, the buyer understood the document containing the exclusion and its effects, and they signed this document at a place other than the dealer's business premises and it was witnessed by a person nominated by the Department of Business or a member of the police force (CAFTA s 169(4)(b)(ii)). Also, before the buyer signed the contract, the witness must have read them a prescribed warning about the rights they would be foregoing by signing. The other conditions implied by the ACL can't be excluded from the contract (see Contracts and consumer protection ).

In addition, the following types of vehicles are not covered by a dealer's duty to repair:
  • commercial vehicles - defined as vehicles made or adapted for carrying goods or ten or more people or for commercial or agricultural use. The definition doesn't include utilities, station wagons, panel vans, camping vehicles or four wheel-drives, unless the buyer gives the dealer written confirmation that the vehicle is to be used primarily for commercial purposes [CAFTA s125(2)]
  • a vehicle or class of vehicles the Minister declares to be exempt under s168 of CAFTA
  • a used vehicle that has been continuously in the buyer's possession or under their control for at least three months immediately preceding the sale
  • a vehicle sold to a trade owner
  • a vehicle sold in an auction conducted by a licensed auctioneer

It is important to note that the consumer guarantees provisions under ACL apply in addition to the warranty provided under s168 of the CAFTA (see Contracts and consumer protection )

Getting out of a used car deal

A consumer who is dissatisfied with a used car contract may be legally entitled to get out of it. The two main objectives in getting out of (or avoiding) a used car contract are to cancel the contract and recover the deposit. Under the law, there are several circumstances where a consumer can terminate an agreement, such as when:
  • the trader has breached s 160 of the CAFTA by selling a second-hand vehicle using the wrong contract
  • a condition precedent (a condition that must be met before the contract comes into effect) has not been or has yet to be fulfilled
  • the goods are not of acceptable quality or not fit for the purpose for which they were bought or for which they are commonly used [ACL s54]
  • a trader misrepresented a major feature of the sale to the consumer who relied on that misrepresentation to enter into the agreement

A legal cancellation of a contract is called rescission (see Contracts and consumer protection ). Where the buyer rescinds a contract and the dealer disputes the legality of the rescission and refuses to refund the deposit, it may be necessary to take the matter to court, as a small claim, for example (see Contracts and consumer protection ).

Breach of contract

A contract for a used car purchase can also be avoided where there has been a breach of a provision in the ACL. A contract that is not in writing in the prescribed form can be rescinded by the purchaser [CAFTA s160]. The purchaser's rescission must be given to the dealer in writing no later than three months after the date of the contract.

Failure of a condition precedent

A contract is subject to a condition precedent when the dealer and the buyer agree that the sale will not be final until a certain event has occurred. A common condition precedent is to make a contract subject to a satisfactory mechanical check organised by the buyer. A buyer who signs a contract on this basis can choose not to continue with the contract if the check finds the vehicle unsatisfactory.

Another common condition precedent is to make the agreement subject to and conditional upon the buyer obtaining finance on or before the delivery date for the vehicle. If the contract is subject to finance and it can't be obtained, the agreement can be cancelled as long as the buyer has made an application for finance and been refused.

Breach of implied conditions

Even though a contract may not expressly state that the dealer guarantees the quality of the vehicle being sold, the contract includes implied conditions and warranties of quality.

The ACL specifies that where a person supplies goods to a consumer (other than by auction), there is an implied condition (or 'guarantee') that the goods supplied under the contract are of acceptable quality. In addition, where the consumer directly expresses or implies the purpose for which the goods are being acquired in discussions with or in written communications to the supplier, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose.

There is no one-size-fits-all definition of acceptable quality when it comes to second-hand vehicles, as this ultimately depends on the particular circumstances of the vehicle and its purchase. However, a lack of quality can be established through a mechanical check by an Automobile Association of the Northern Territory (AANT) or independent mechanic. If it can be established the dealer's breach of guarantee is a 'major failure', the contract can be rescinded by giving the dealer written notice or by returning the motor vehicle and supplying details of the fault [ACL s259].

Incorrect mileage

The CAFTA states that a dealer cannot, without first informing the buyer, offer to sell a motor vehicle that has an odometer that has been replaced or altered. The penalty is now a maximum of $15,300 for individuals and $76,500 for bodies corporate. The buyer involved may have grounds to take legal action against a dealer convicted of such an offence if they paid more than the fair value for the motor vehicle. The court determines the 'fair value' of a motor vehicle and may call on both expert witnesses and anecdotal evidence to do this.

Recompense

Compensation (damages) may be payable to either the dealer or the purchaser where a contract has been cancelled and a dispute results over each party's entitlement. Damages can be sought where:
  • the contract was rescinded validly and the damages aim to restore the parties to their original positions
  • one party wrongfully cancelled the contract and the other suffered loss as a result.

Damages can also be claimed from a dealer who is convicted of making false or misleading representations about the year a vehicle was made, its model or the year it was first registered, or of altering or replacing an odometer. A buyer may be entitled to recover the difference between the vehicle's purchase price and its fair value.

Misrepresentation

A dealer who makes a false statement to a buyer, which induces them to enter a contract, may have made a misrepresentation or engaged in misleading conduct. As with any other consumer contract, the buyer may be entitled to rescind the contract or claim compensation (see Contracts and consumer protection ). If a misrepresentation is made, the buyer can cancel the contract by giving notice to the dealer prior to or within a reasonable time of accepting the vehicle or can claim damages. What constitutes 'a reasonable time' depends upon the circumstances.

Common misrepresentations include statements about a car's performance, speed, condition or mileage and assertions that paying a deposit and signing a contract doesn't constitute a binding agreement, but will merely hold the vehicle until the buyer makes a final decision.

Changing your mind

A buyer should always be cautious when entering into a contract to buy a used car. Although the common law and statutory provisions offer some protection in certain circumstances, much less protection is available to a buyer who simply changes their mind and no longer wishes to proceed with the sale. They should remember that an offer to purchase can be withdrawn at any time before it is accepted.

Where a contract has been formed, and there is no condition precedent and no misleading conduct or other unfair behaviour has been used to induce the buyer, the dealer may be able to enforce the contract. If the contract is enforceable, a buyer who wants to opt out will usually lose any deposit paid - up to 10% of the purchase price. Where the deposit is greater than 10% or the dealer is claiming an amount greater than the actual deposit, the buyer should obtain legal advice or contact Consumer Affairs.

Buying a new motor vehicle

Buying a new motor vehicle is usually not as difficult as buying a used motor vehicle, but there are still some important things to keep in mind, for example, getting the right car for you, terms and conditions, warranties, finance and insurance.

Choosing the right motor vehicle for you

When you are preparing to purchase a new vehicle, you should consider the following sorts of things:
  • what do you plan to do with your new vehicle (for example, driving, off-road, just on weekends, etc)?
  • what is your price range and how will you pay for it?
  • what vehicle features do you want (for example, fuel economy, air conditioning, warranty period, reliability, etc)?
  • what size vehicle are you looking for (for example, a sedan, hatchback, van, etc)?
  • are you planning to re-sell or trade it in later on? You should also check road tests in magazines and talk to others who have bought similar vehicles about their experiences. Often it is useful to talk to a range of motor vehicle dealers and motor vehicle associations to get a better idea about the right vehicle for you. Don't forget most dealerships also allow you to test drive vehicles.

Working out the real on-road costs

You will need to work out what it will really cost you to get your new vehicle on the road and you should prepare your budget accordingly. The full 'on the road' cost of a new vehicle may be more than the price quoted in an advertisement. Usually these prices are qualified in advertisements to show that other charges, like duty or dealer delivery fees apply. In addition there may be extra costs for non-standard optional features (e.g. air bags). If you think that an advertisement for a new motor vehicle is misleading or false because it doesn't tell you the whole story or there are hidden charges, it might be unlawful (see Contracts and consumer protection ). You should contact NTCA or the ACCC about this.

You will also need to take out motor vehicle insurance on your vehicle, so you should get some quotes from insurance companies (see Insurance ). If you require finance to purchase your new motor vehicle, you will have to determine if you can afford the repayments in your budget (see Buying on credit ). Lastly, don't forget there are normal running costs of a vehicle, like vehicle registration and fuel, and you should factor these into your budget.

Finance and insurance

If you need finance or a loan to pay for your new motor vehicle, shop around for the best deal rather than relying solely on the motor vehicle dealer where you are buying your vehicle. You may, for example, be able to access a personal loan from a credit provider, such as a bank or credit union, at a cheaper interest rate than the finance company used by the dealer. Be sure you can afford to repay any finance or loan you take out, so that you do not get yourself into financial difficulties that can lead to unmanageable debts or bankruptcy (see Debts & Bankruptcy).

You will also need insurance and you should shop around to find the most competitive premiums and policy coverage. Ensure your vehicle is insured before you take delivery of it (see Insurance ).

Trading in or selling your old vehicle

If you already have a vehicle, you could trade it in with the motor vehicle dealership where you are buying your new vehicle. Be prepared to negotiate a price for your old vehicle with the dealer as they may have some 'room to move' on the new vehicle's sale price. Alternatively, you may get a better price by selling it privately. If you do decide to trade it in or sell it privately you can get an idea of the value of the vehicle by using the 'Redbook' resource. You can find this on the internet at http://www.redbook.com.au/. You could also talk to other motor vehicle dealers or manufacturers to get an estimate of what your old vehicle is worth.

Warranties

All new motor vehicles have 'on road' warranties. You should carefully check what warranties are on offer for the vehicle you are intending to purchase as the details and warranty periods may vary considerably from make to make and dealer to dealer. Identify any faults with the vehicle as soon as possible and get them fixed early, within the warranty period. When repairs are carried out under warranty, they should be carried out by a manufacturer-approved mechanic using genuine manufacturer's spare parts, otherwise the warranty may be affected. If you are in doubt about a mechanic or the parts to be used, contact the vehicle manufacturer to check. Also, if you are fitting any non-standard optional features (like air bags) after delivery, check with the vehicle manufacturer to see if this will affect the warranty.

A car sales person may offer you extra insurance such as tyre, rim, paint and windscreen insurance. If you have comprehensive insurance you may already have sufficient cover for these and other add-on insurance products. The Australian Securities and Investments Commission (ASIC) Money Smart website has some very good information on what you need to know so you don't get caught paying for something you don't need. More information can be found here: https://www.moneysmart.gov.au/insurance/car-insurance/add-on-insurance.

Terms and conditions

Remember that an order form for a new vehicle is legally binding so do not sign it before you are ready, as there is no 'cooling-off' period for vehicle sales in the Northern Territory. Make sure you understand all the terms and conditions before signing and delete any sections from the order form that you don't agree with. Don't sign any form or contract with blank spaces and rule through sections that are blank or that do not apply to your purchase. Be sure to confirm the delivery date.

Vehicle check

Check your new vehicle thoroughly before you sign to accept delivery. Check that any non-standard optional features you ordered are included and that the vehicle has a spare tyre, tool kit and jack. Check for any damage to paintwork or any faults in the electrics. Once delivered, remember that new vehicles have warranty periods, so if you identify a problem with the vehicle take it back to the dealer to be checked and fixed.

Useful organisations

Northern Territory Government Department of Business

The NT Department of Business is responsible for matters relating to the licensing of motor vehicle details.

Enquiries about licensing may be directed to Licensing NT within the Department of Business by telephone on (08) 8999 1800 or by email at glsadministration.dob@nt.gov.au

Their website is https://business.nt.gov.au/

Motor Trades Association

Many reputable dealers are members of the Motor Trades Association (MTA). A person who is in dispute with, or has a complaint about, the conduct of a dealer who is a member of the MTA can contact the MTA. An officer of the association can assist by investigating the matter and attempting to find a resolution to the problem. The Darwin office of the MTA is located at:

Unit 9, Wingate Centre, 41 Sadgroves Cres, Winnellie, NT

Tel: 8947 6990.

Northern Territory Consumer Affairs

The website http://www.consumeraffairs.nt.gov.au/Pages/default.aspx publishes several fact sheets that provide useful practical information on buying a new or used car. The website also provides a checklist to assist consumers ask the right questions when buying a car.

Personal Property Security Register - National Service Centre

Enquiries about the PPSR may be directed to the National Service Centre by telephone to 1300 007 777 (1300 00PPSR) or email at enquiries@ppsr.gov.au

The PPSR website is https://www.ppsr.gov.au/

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