Why we need a vehicle ombudsman for second-hand car sales

Pushkar Gogia runs a business making vegan desserts and needs a refrigerated van to distribute his goods across Melbourne.

He spent around $24,000 to buy a second-hand vehicle from Automax in 2020.

Mr Gogia said within three months the engine “was totally kaput”.

“We’re delivering to our customers, and the van just sort of died,” he said.

“We were absolutely devastated.”

Mr Gogia initially complained to the dealer Automax but said there was no response.

Next, he went to Consumer Affairs Victoria, who tried to help before advising Mr Gogia to go to the Victorian Civil and Administrative Tribunal (VCAT).

A man puts a box into a van
Pushkar Gogia says the dispute resolution for consumers should be simplified. (ABC News: Rhiana Whitson)

He said the tribunal process was “extremely overwhelming”.

“It was very frustrating,” he said.

“I’m trying to run a small business and I’ve got to now study law in the middle of it and try to understand how this works.”

In August this year, after Mr Gogia got assistance from community lawyers at Westjustice, VCAT ruled in his favour, and ordered Automax to pay $7463 to cover the cost of repairs and a hire vehicle.

While Mr Gogia is happy about the outcome, he said the process needs to be simplified for consumers.

“It’s been such a battle,” he said.

“It shouldn’t be so complex that you need to have become a mechanic and become a lawyer to put a case forward.”

A man puts a box into a refrigerated van
Pushkar Gogia took the used car dealer he bought this refrigerated van from to his state’s civil and administrative tribunal and won. (ABC News: Simon Tucci)

No incentive to stop selling lemons

Automax, trading as CMG Automotive, claims to be one of the biggest independent used car dealers in Victoria.

Mr Gogia isn’t the only person who has had trouble with a vehicle from Automax. The ABC has spoken to two other Automax customers who are struggling to make ends meet after using finance to buy a car from the dealer, only to have the vehicle break down soon after.

In the past six years, more than 340 complaints were lodged about CMG Automotive to Consumer Affairs Victoria. They’ve also been taken to the VCAT at least four times, and were ordered to pay the complainant in three of those cases.

A spokesperson for CMG Automotive said that at any time they stock over 300 cars and sell more than 4000 vehicles per year.

“We absolutely pride ourselves on our quality service and overwhelmingly our customers are satisfied, which is reflected in the fact that many of them are repeat customers,” a spokesperson said.

“Our records do not reflect the 345 complaints over six years – which would be less than 1.5 per cent of all our customers, but confirm that overwhelmingly complaints are quickly resolved.”

Consumer Action Law Centre (CALC) said they have had multiple calls to their legal advice line about this one dealership.

“I think it’s an example of how the current system doesn’t incentivise car dealers to play ball,” senior policy officer Brigette Rose said.

“When there’s a dispute, it incentivises them to really prolong it.”

In a statement, a spokesman for CMG Automotive said that company had worked hard to resolve the issue with Mr Gogia. This “included the offer for us to repair the car and a further offer of $2000 towards the mechanical work that was performed by the customer without our consent”, he said.

“Unfortunately, efforts to resolve the situation were complicated by the second COVID lockdown, which led to the forced closure of our business from July to October 2020.”  

Ombudsman needed

Every year there are thousands of official complaints about defective second-hand vehicles lodged with state and territory consumer affairs or fair trading bodies.

However, there is no fast, affordable, and effective way to resolve disputes, consumer advocates say.

When a person buys a car they are protected by Australian Consumer Law, which states that goods must be of acceptable quality, fit for purpose, and match the description supplied.

Shiny cars
Used car statutory warranties vary in each state and territory. (ABC News: John Gunn)

There are also statutory warranties that apply to used cars in each state and territory.

In Victoria, New South Wales, Queensland, Western Australia and the ACT, a statutory warranty is valid for three months, or 5000 kilometres, which ever happens first.

The warranty covers cars under 10 years old and that have travelled fewer than 160,000 kilometres.

In Queensland, a one month statutory warranty or the first 1000 kilometres applies to older cars with more kilometres on the odometer. In WA, the same shorter warranty applies to cars no more than 12 years old. 

In South Australia, a warranty applies to cars under 15 years old, with an odometer of fewer than 200,00 kilometres and purchased for over $3000. The duration is two months if you bought it for under $6000, and three months if it cost more. 

In Tasmania, a statutory warranty applies to cars less than seven years old, that have travelled fewer than 120,000 kilometres for three months, or after 3000 kilometres.

While there are laws in place to protect consumers who buy dud cars, the problem is enforcing them.

In most states or territories, when you have a disagreement with a car dealer about your rights you need to go to a civil and administrative tribunal to resolve the dispute.

Ms Rose said this can be a long and expensive process, with buyers often required to pay for expert mechanical evidence reports.

“Most people give up and the car dealers know that,” she said.

“They can use that against people when they just sell broken cars over and over again.”

Brigette Rose, Consumer Action Law Centre
Consumer Action Law Centre senior policy officer Brigette Rose says most consumers who purchase faulty cars give up on pursuing car dealers because the costly process can take years.

More than 30 per cent of calls to CALC’s legal helpline about consumer guarantees relate to defective cars – that is significantly more than any other consumer good or service. 

“We’ve seen people come to our service after paying $25,000 – $30,000 for a car that breaks down almost immediately,” she said.

“They don’t know what to do about it … because the dealer just is not responsive.”

Ms Rose said buying a defective second-hand car can be crippling for people, particularly if they took out a loan to purchase the vehicle.

“We’ve seen many people who can’t get to work shifts; we’ve seen people who can’t take their kids to school,” she said.

“We’ve seen a huge impact on women and single mums, family violence victims who don’t have the car as a means to flee – so that’s actually their safety being impacted.

“That’s why we need to resolve this problem.”

They believe a motor vehicle ombudsman that is free for consumers would provide “everyday justice” to thousands.

How it could work

CALC said an ombudsman would simplify the process for consumers, by providing free conciliation, and expert mechanical evidence to figure out if the car dealer should pay for repairs.  

To fund an ombudsman, Ms Rose said each dealership would pay a small fee, which varies according to the size of the dealership.

“On top of that there would be a case fee, which would mean the more complaints a dealership gets, the more they would have to pay the ombudsman,” she said.

“The longer it takes to resolve a dispute, the fee increases – so it incentivises dealers to come to the table.”

Indigenous communities affected  

The sale of faulty cars to people in remote Aboriginal communities is an ongoing issue, consumer advocates say.

Financial Legal Rights Centre, which runs Indigenous debt help line Mob Strong, backs calls for an ombudsman.

“A lot of our clients find it really hard to navigate the system to be able to get a remedy, because there is a massive power imbalance between the dealer and our clients,” Financial Legal Rights lawyer Mark Holden said.

A man in a check shirt stands in his backyard looking down at the ground
Lawyer at Mob Strong debt help line Mark Holden says First Nations communities have been targeted by dealerships selling lemon cars. (ABC News: Dan Irvine)

For example, a young First Nations woman who called Mob Strong took out a high interest car loan through a car dealer, who sold her a faulty car and then refused to fix it.

“So, she’s out of a car and she’s now owing money for a loan on a car that does not work,” Mr Holden said.

While it is generally recommended that people get a mechanic to independently inspect a car before buying it, Mr Holden said that is not an option for his clients.

“There’s absolutely no way that these people can afford to be able to pay for an independent mechanic to be able to assess deep details of mechanical design flaw switch, something that the dealer should have done in the first place.

“Our resources are heavily limited as well and we can’t really help everyone who come to us.

“We need a free dispute resolution process – a lot of our clients need the car to be able to survive, not just to be able to live their life,” he said.

Wujal Wujal drone shots
Consumer advocates say residents in the remote Aboriginal community of Wujal Wujal in Queensland have been targeted by dodgy car dealers. (Supplied: Choice)

The remote community of Wujal Wujal in Far North Queensland has been a key focus of consumer advocacy group CHOICE’s work around defective car sales.

“We found that pretty much everyone we spoke to knew someone who had an issue with a dodgy car that had been sold to them, and they’ve struggled to get redress,” Jani Blakkarly from CHOICE said.

CHOICE is also calling for tribunals to be able to issue penalties to car dealerships that do the wrong thing.

“So for businesses that actually breach consumer law, and don’t honour the repair or replacement rights, to actually have some kind of enforceable penalties,” he said.

Improve current systems

The Australian Automotive Dealer Association does not believe a new automotive ombudsman would be any better equipped to handle disputes than existing authorities.

“We want our industry to be clean,” CEO James Voortman said.

However, Mr Voortman said an ombudsman would “just be another payment” on businesses, and it’s better to try to improve the existing systems.

“If there are serial offenders in our industry, we would urge that the consumer affairs departments, the fair-trading departments need to take a strong look at those dealers, and they need to take action,” Mr Voortman said.

“These are obviously licensed businesses, and the state governments have the ability to revoke those licences.”

James Voorten
Australian Automotive Dealer Association chief James Voortman says consumer affairs bodies should revoke the licences of serial offenders. (ABC News: Matt Roberts)

‘Can’t make ends meet’

With his debts mounting, Peter Wilson wants a way to resolve his dispute with Automax as quickly as possible.

Mr Wilson bought a ute from the company in January 2021.

He said he was hoping for a reliable car, but after six weeks the engine stopped suddenly on his way home from work.

A selfie of a man in his 30s with eyebrow piercing and black tshirt
When Peter Wilson’s ute broke down he lost his job because he couldn’t make it to work for a few weeks. (Supplied: Peter Wilson)

The 33-year-old labourer had paid more than $30,000 for the vehicle using finance.

Now he has gone into more debt to get another second-hand car, and to pay for repairs on the ute.

“I don’t think I was at fault at all, I think someone else should be covering this,” he said.

“I can’t make ends meet at the moment – I am really stressed out about everything, everyday.”

In a statement, Automax said that when Mr Wilson’s car broke down they requested the vehicle back to investigate what happened but he declined their offer. 

“We are happy to discuss the dispute that Mr Wilson has with the third-party warranty provider in a bid to resolve the matter to his satisfaction.”

He said he planned to write another letter to Automax asking them to pay for repairs, and if that was not successful he would go to VCAT.

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