Your rights and the pros and cons of buying a car from a dealer, and what you can do to reduce the risk of common problems.
Advantages of buying from a dealer
Buying a new or used vehicle from a dealer – whether online, at a car yard or at an auction – gives you more consumer rights than if you buy a car privately.
All car dealers must:
- comply with the Consumer Guarantees Act (CGA)
- comply with the Fair Trading Act (FTA) – not mislead you and be clear they are a dealer
- be registered
- give you accurate information in the Consumer Information Notice (CIN) for each used vehicle – the history of the vehicle, price, condition, odometer reading and any money owing.
The Consumer Guarantees Act (CGA) means the vehicle should be:
- of acceptable quality – reasonable in look and finish, durable and safe
- fit for purpose – either generally or to meet a specific purpose you told the dealer before you bought the vehicle
- as described – match the description in advertising or anything the dealer said at the time.
You can seek a repair, replacement or refund if the dealer doesn’t comply with their legal obligations, or the car doesn’t meet one of the CGA guarantees.
If the dealer is a member of the Motor Trade Association, you can access the free mediation service if there’s a dispute.
MTA mediation services (external link)— Motor Trade Association
What ‘acceptable quality’ means
Under the CGA, you can expect any vehicle you buy from a car dealer to be of an ‘acceptable quality’. Whether a car is of an ‘acceptable quality’ depends on whether a reasonable person would find the car acceptable given:
- the type of vehicle sold
- the price paid
- any information about the car, eg history, quality, condition, given by the dealer or in any advertisements
- the nature of the car dealer and how the car was sold
- any other relevant circumstances, eg how soon the car developed a problem after purchase.
So the ‘acceptable quality’ of a vehicle will depend on the particular car you buy and how the car dealer sells it to you.
Drawbacks of buying from a dealer
It can be more difficult to find a range of low-cost vehicles to choose from at a dealership. If you are looking for a cheap car, you may have more options if you buy privately.
Buying from a dealer isn’t without any risks. While most car dealers have honest business practices, you should always do careful checks and be aware of potential problems before you buy.
Set yourself up for success
Know what to do and expect before you buy from a dealership.
While at the dealership
- Read the Consumer Information Notice (CIN) in the window of the car.
- Do basic checks and test drive the car.
- Get the car inspected by a mechanic or a vehicle inspection service. Some dealers will provide a mechanical inspection as part of the sale price — but it’s usually best to organise your own independent inspection.
Read more about pre-purchase inspections and checks
During purchase at the dealership
- If you get a loan through a dealer, carefully consider any finance arrangements before you agree.
- Read the sales agreement or contract carefully.
- Carefully consider trade-in offers and the value of any add-ons, eg accessories and extended warranties.
- Save copies of your sales agreement, CIN, the original advert and any other documentation related to the sale.
Read more about car sales agreements and warranties
Read more about getting a loan for your car
Protect yourself from common problems
Here are some common risks to be aware of when you buy from a dealer — and tips to avoid them.
Buying a faulty or unsafe vehicle
Protect yourself by always viewing and testing a car before you buy it.
Don’t rely on a valid warrant of fitness (WoF) as proof of the car’s reliability. A WoF doesn’t tell you anything about the mechanical condition of the car.
It’s always best to get the car inspected by a professional mechanic or a vehicle inspection service.
Cash back offers too good to be true
Be wary of any offers of money back or overly generous trade-in offers. The purchase price may have been increased to include the cost of the cash back deal or trade-in offer.
A good rule of thumb is if a deal sounds too good to be true, it probably is.
Being asked to pay a cash deposit
Avoid paying a cash deposit on a car when possible. It may be non-refundable if you decide not to buy it later. You can ask the dealer to hold the car for you for a short time if you want to think about it or get it inspected. It may be a warning sign if they refuse without a good reason.
Car finance with expensive interest rates
Getting a loan through a dealer is usually more expensive than sorting out finance with a bank or independent lender beforehand. Shop around for the best deals. If possible, get pre-approval from a lender who offers the lowest interest rates before you go through the dealership.
Time limit to return a faulty vehicle
Some dealers may state you can only return a faulty car within a specific time period and that they won’t be responsible for faults after that period. This is not accurate.
Under the Consumer Guarantees Act (CGA), a car must be of acceptable quality. This means you can expect a car to last a reasonable amount of time. What a ‘reasonable amount of time’ means depends on the particular car you bought and how the car dealer sold it to you.
Read more about what acceptable quality means.
Dealers who say they aren’t responsible for faults covered by the Consumer Guarantees Act and other consumer laws may be in breach of the Fair Trading Act.
If the dealer refuses or fails to fix the faults, or doesn’t do so in a reasonable time, then you may be able to reject the car and ask for a replacement or a refund. The time period for you to do this is limited, so you should act as soon as possible.
Read more about Solving issues with your car dealer
Inaccurate odometer readings
‘Clocking’, or odometer tampering, is the illegal practice of turning back the odometer reading so the car appears to have fewer kilometers on it.
A vehicle history report will show any inconsistent odometer readings. These are available online through a number of providers. You can also look for signs of tampering, eg if the vehicle looks well-worn but the mileage is low.
Sellers misleading you about the car
Under the Fair Trading Act, dealers cannot mislead you about the car in any way. This includes comments or claims made in person and in any advertisements or documentation.
Keep a copy of any adverts, details or promises the seller makes about the condition of the car in case a problem occurs after purchase.
Money owing on the car from the previous owner
Before you buy a car, check if the 'security interest' box is ticked on the Consumer Information Notice (CIN). If it is, this means the car still has money owing on it to a finance company. You should not buy a car if the ‘security interest’ box is ticked.
If any of the information given about the security interest is wrong or inaccurate on the CIN, then it is invalid. This means if the box has not been ticked, but you find out the car has money owing on it after you purchase it, the finance company:
- will not be able to repossess the car from you
- does not have a claim over the car
- must organise compensation from the dealer.
Consumer Information Notice (CIN) is not displayed or is inaccurate
Dealers must display an accurate CIN on used vehicles. A CIN is not required for new vehicles. The CIN shows important information about the vehicle, including:
- vehicle details – the year first registered, make, model, vehicle identification number (VIN), chassis number, odometer reading and vehicle registration details
- if there is money owing on the car
- the dealer’s details and registration
- the cash price – including GST, registration and licensing costs
- information about your consumer rights on the back of the card, including where to go if you have problems.
Car market operators must take reasonable steps to ensure car dealers using their venue display a CIN on any used motor vehicle offered for sale. But operators aren’t responsible for what is on the CIN.
Extended warranties and add-ons
Some dealers may ask you to purchase an extended warranty, breakdown insurance or other add-ons. Even if you don’t get an extended warranty, you are still covered by the Consumer Guarantees Act if anything goes wrong. If you do buy an extended warranty, the dealer must clearly explain what an extended warranty covers over and above your consumer rights.
If you add on other accessories, make sure you know how much they cost before you agree.
You can read more about extended warranties on Commerce Commission’s website.
Selling extended warranties(external link) — Commerce Commission
Read more about Warranties
Read more about pre-purchase inspections and checks
Read more about solving issues with your car dealer