Soured Cars – what can I do if I purchase a lemon car?

A CHOICE survey discovered that the majority of Australians report experiencing issues with their new cars within the first five years, with 14% of them reporting major problems that caused the cars to completely stop working or suffer significant operational problems rendering them unusable.

With global supply chain issues plaguing the automobile industry, the purchase of second-hand vehicles including from used car dealerships, has become increasingly common, especially due to the less than appealing alternative of waiting years for the shipment of a new purchase to arrive. This may only serve to increase the likelihood of lemon car issues arising at a much higher rate than ever before. More so than ever, the protection of consumers and the guarantees they expect (and are entitled to) under the Australian Consumer Law (ACL), when (and after) purchasing motor vehicles are pressing issues.

 What is a “lemon”?

A “lemon”, according to the Commonwealth Consumer Affairs Advisory Council, is a product, usually (but not always) a car, that is unable to fulfil its function as intended, normally consisting of defects unbeknownst to its purchaser at the time of purchase.

A ‘lemon car’ is commonly viewed as a brand-new vehicle, or more often than not, a second hand one, which is purchased, only for the consumer to later realise faults within it. Such faults can range from the quality of the brakes to the alignment of the chassis and the steering of the vehicle. Unlike in the United States of America, where most states have specific “lemon laws”, concerns of a similar nature in Australia are addressed by the guarantees afforded to consumers under the ACL.


 The ACL is found in Schedule 2 of the Competition and Consumer Act 2010 (Cth). It applies in each State and Territory. The ACL has the objectives of:

  • ensuring that consumers are sufficiently and well-informed to benefit from and stimulate effective competition;
  • ensuring that goods and services are safe and fit for the purposes for which they were sold;
  • preventing practices that are unfair;
  • meeting the needs of those consumers who are most vulnerable or are at the greatest disadvantage; and
  • providing accessible and timely redress where consumer detriment has occurred.

 Critically, any term in a contract which seeks to limit, exclude, or modify consumer rights and guarantees under the ACL is likely to be void.

Section 18 of the ACL

A person must not, in trade or commerce, engage in conduct that is misleading or, deceptive, or likely to mislead or deceive.  As such, any written and oral statements by a seller or sales agent about the motor vehicle are likely to be relevant to any dispute about a motor vehicle.

Consumer Guarantees:

The guarantees in the ACL generally apply to products being supplied in trade and commerce except by auction, meaning generally the ACL does not apply to private sales of second-hand cars, in the same way it does not apply to private sales in relation to consumable products in general. It generally only applies to a person buying goods or services from a business.

Section 54:

A guarantee that a product being supplied is of ‘acceptable quality’, meaning the product is for the purpose for which products of that kind are commonly supplied, free of defects, safe, durable and acceptable in finish and appearance. 

Section 55:

A guarantee of reasonable fitness for the disclosed purpose, and for any purpose for which the supplier represents that the product or goods are reasonably fit.

Section 56:

A guarantee that the product or goods being supplied correspond with their description, especially in instances where reference Is made to a sample or a demonstration model.

 A “Major Failure”

A failure to comply with certain consumer guarantees, such as the guarantees as to ‘acceptable quality’, fitness for any disclosed purpose and that the product correspondence with its description may constitute a ‘major failure’ thereby entitling the consumer to take action against the supplier.

A ‘major failure’ may occur in respect of the supply of a motor vehicle where:

  1. a reasonable consumer fully acquainted with the nature and extent of the failures concerning the vehicle would not have purchased it;
  2. the vehicle departs from its description in significant respects, especially when references are made to a demonstration model or sample;
  3. the vehicle is substantially unfit to be used for driving and this cannot be remedied for use easily and within a reasonable amount of time;
  4. the vehicle is unfit for its disclosed purpose, as made known at the time of purchase; or
  5. the vehicle is not of acceptable quality because it is unsafe to drive.

 The above is a non-exhaustive list of matters, which taken together or individually, may constitute a major failure by a supplier of a motor vehicle to comply with the guarantees afforded to consumers by the ACL. 


A consumer may require the supplier to remedy a failure within a reasonable time, meaning the supplier may repair or replace the motor vehicle, or provide a refund.

A consumer, by action against the supplier, may recover compensation for any reduction in the value of the motor vehicle below the price paid, or payable by the consumer, for the motor vehicle due to a ‘major failure’.

A consumer who experiences a major failure may also give notice to the supplier, within the rejection period, that they reject the motor vehicle and of the grounds for the rejection. The rejection period is the period from the time of the supply of the motor vehicle within which it would be reasonable to expect the relevant failure to comply to become apparent, and may vary depending on several factors, including whether the motor vehicle being supplied is new or used.

In Wah v Imex Goods Network Pty Ltd Trading as Imex Motors [2017] ACAT 54, concerning a dispute about the rejection of a used motor vehicle between a consumer and a dealership, the ACT Civil & Administrative Tribunal (Tribunal), noted there was no issue that the vehicle had been tested and issued a road worthy certificate, and that the parties agreed that the vehicle left the dealership in good condition and good working order. The issue for the Tribunal in determining whether the motor vehicle was of ‘acceptable quality’ required it to determine the duration of time after the sale of the motor vehicle that it was to be of acceptable quality pursuant to the ACL. In this case, the motor vehicle first broke down three weeks after the sale, after the consumer had driven 1,900kms, and again a day after it was repaired requiring the engine to be replaced. The Tribunal was therefore satisfied the vehicle was not of acceptable quality and the consumer was acting reasonably in promptly rejecting the vehicle. The Tribunal gave judgment in the consumer’s favour. 

What to do if I have purchased a Lemon Car?

If you do happen to have a lemon car on your hands, speak to the car dealer about your options. If you are not satisfied, and you are unsure of what to do next, you should consider seeking legal advice on the best course of action for you.

For all dispute and litigation related queries or concerns, please contact the BAL Lawyers Litigation and Dispute Resolution team on 02 6274 0999.

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