Imagine this scenario. Timmy spends $70,000 purchasing his dream car from a licensed motor vehicle dealer. Shortly after the purchase, he discovers multiple defects. Instead of enjoying his new car, Timmy is left frustrated and disappointed. He now wants to return the vehicle and get a refund. Does he have the legal right to do so?
This is a situation many consumers face, yet few are clear about their rights.
In New Zealand, these situations are primarily governed by the Consumer Guarantees Act 1993. When a car is bought from a dealer for personal use, it must meet certain minimum standards. If it does not, the buyer may have legal rights against the dealer and, in some cases, the manufacturer. Central to these protections is the requirement that goods be of acceptable quality under section 6 of the Act.
In addition, the Fair Trading Act 1986 may be relevant where the dealer induced the buyer to enter into the transaction through false, misleading, or deceptive representations.
What does “acceptable quality” mean?
In simple terms, a car should perform as a reasonable consumer would expect, having regard to its type, price, and how it was sold. It should be safe, reasonably durable, and free from defects a buyer would not normally expect. What is acceptable for an older, low-priced vehicle may be very different from what is acceptable for a newer or more expensive one.
Where a vehicle has multiple defects, it is unlikely to meet this standard.
What options does Timmy have?
Timmy’s options depend on how serious the defects are. If the problems can be fixed, he must first give the dealer a reasonable opportunity to repair them. If the dealer refuses or fails to do so, Timmy may have the car repaired elsewhere and recover the reasonable cost, or he may choose to reject and return the vehicle.
If the defects cannot be fixed, or they amount to a “failure of substantial character”, Timmy can reject the car and seek a refund, as well as claim compensation for any additional loss he suffers because of the defects.
What is a “failure of substantial character”?
A failure of substantial character exists where a reasonable buyer would not have purchased the vehicle had they known about the problem, where the vehicle is unsafe, or where it cannot be used properly and cannot be fixed easily or within a reasonable time. A series of smaller defects can collectively amount to a failure of substantial character.
Can Timmy get a refund?
Based on these principles, Timmy may be entitled to reject the vehicle and obtain a refund. This will depend on the nature of the defects, how quickly the issues were raised, and how the dealer responds.
If the dealer has assured Timmy that there is “no issue” or that the car is in “good condition”, these could also amount to false or misleading representations. Where Timmy relied on those statements when deciding to purchase, he may have a potential Fair Trading Act claim, in addition to his rights under the Consumer Guarantees Act.
If you are facing a similar situation, our legal specialists can provide clear, practical advice tailored to your circumstances. Every case is different, and early advice can make a significant difference.