How to buy a second-hand car from a dealer

Introduction

The sale of used motor vehicles is governed by the MOTOR VEHICLE SALES ACT 2003, which came into force on 15 December 2003. This Act reforms and deregulates the industry, repealing the MOTOR VEHICLE DEALERS ACT 1975.

The new Act makes the following significant changes:

  • There are now no special statutory warranties for people buying from used-car car dealers. Instead, consumers will rely on the laws that cover other types of goods and services – that is, the CONSUMER GUARANTEES ACT 1993, the FAIR TRADING ACT 1987 and the SALE OF GOODS ACT 1908.
  • There is still a specialist Motor Vehicles Disputes Tribunal, but you can now take your dispute directly to it, rather than first having to complain to the Motor Vehicle Dealers Institute. (The Institute now has no statutory functions; as a private body, it is now combining with the Motor Trade Association.)
  • The Motor Vehicle Dealers Fidelity Guarantee Fund has been abolished. Under the previous law, if a dealer was unable to pay compensation ordered by the Motor Vehicles Disputes Tribunal, the consumer could recover it from this Fidelity Fund.
  • Licensing of used-car dealers used to be dealt with by the Motor Vehicle Dealers Licensing Board, which had to be satisfied of the dealer's personal character, financial position and fitness to be licensed. Now dealers must register with the Ministry of Economic Development on the Register of Motor Vehicle Traders. Registration is automatic if certain minimum criteria are met.

Who is a "motor vehicle trader" for the purposes of the Act?

The MOTOR VEHICLE SALES ACT 2003 covers sales by any "motor vehicle trader", and requires them to be registered. This applies to:

  • car dealers
  • car auctioneers
  • car market operators
  • importers
  • wholesalers
  • car consultants
  • people who import more than three cars in any year
  • people who sell more than six cars in any year

What information must be displayed with the vehicle?

All second-hand vehicles being offered or displayed for sale must have attached to them a prominent notice, called a "Supplier Information Notice". This notice must provide the following information:

  • Information about the trader:
    • the trader's name, address and contact details
    • whether the trader is registered, and if so, the trader's registration number or identifier
  • Information about price and any security interest:
    • the cash price of the vehicle, including GST (unless the sale is by auction or competitive tender)
    • any security interest over the car that is recorded on the Personal Property Securities Register (PPSR)
  • Information about the car:
    • the make, model, year and engine capacity
    • the vehicle identification number or chassis number
    • the registration plate number
    • the operating fuel type
    • the actual distance the car has travelled – The notice must include either: (1) the odometer reading, or (2) this statement: "I [the trader's name] cannot accurately determine the actual distance this motor vehicle has travelled because the odometer reading may be inaccurate", or (3) this statement: "This motor vehicle's odometer reading is inaccurate."
  • Information about registration, warrant of fitness and so on:
    • whether the vehicle is registered, and if it is, when its registration ("vehicle licence") expires
    • whether the vehicle has a current warrant or certificate of fitness
    • whether the vehicle is subject to road user charges, and whether any road user charges are outstanding
    • whether the vehicle has been reregistered
    • the year the vehicle was first registered in New Zealand
    • if it's an imported vehicle, the year it was first registered overseas, the country where it was last registered, and whether it was damaged when it was imported

The trader must get a written acknowledgement from you that you received a copy of this notice immediately before the sale. You cannot contract out of this requirement – that is, the trader is bound by this requirement even if you agree otherwise.

Car market operators must take reasonable steps to make sure that people selling vehicles at the market display a Supplier Information Notice on the car.

What if there isn't a proper Supplier Information Notice with the car?

A trader who fails to attach a Supplier Information Notice to the vehicle as required commits an offence against the FAIR TRADING ACT 1986, and can be fined up to $60,000 if an individual, or up to $200,000 if a company.

A car market operator who fails to take reasonable steps to make sure that sellers display the notice on their cars can be fined up to $2,000.

What warranties do I get when I buy from a trader?

When you buy a used car from a registered trader there are now no special warranties in addition to the consumer-protection laws that apply to other goods and services bought from shops and traders – that is, the CONSUMER GUARANTEES ACT 1993 and the FAIR TRADING ACT 1987 (see, respectively, How to exercise your rights under the Consumer Guarantees Act and How to: Protection under the Fair Trading Act. You can take your dispute to the Motor Vehicle Disputes Tribunal under either of those Acts (see below).

The previous law provided you with one of four different categories of warranties, which depended on the vehicle's age and mileage.

Can I be sure that the trader has the right to sell the goods?

Yes. The CONSUMER GUARANTEES ACT 1993 says that when a consumer buys goods from a trader, the consumer is automatically given a guarantee that the trader has a right to sell the goods.

The previous Act, the MOTOR VEHICLE DEALERS ACT 1975, specifically stated that buyers were guaranteed that the trader was the vehicle's true owner. There is no such provision in the new Act and so consumers will have to rely on the CONSUMER GUARANTEES ACT, as explained above.

In a private sale you are also guaranteed, by the SALE OF GOODS ACT 1908, that the seller has the right to sell the vehicle.

Can I be sure that the car is free of any security interest when I buy from a trader?

Yes. The CONSUMER GUARANTEES ACT 1993 says that when a consumer buys goods from a trader, the consumer is automatically given a guarantee:

  • that the goods are free from any security over the goods that the trader hasn't told the consumer about (for example, an interest held by a finance company if there is still money owing on the vehicle), and
  • that the consumer has the right to "undisturbed possession" of the goods

By contrast, in a private sale you have no such guarantee that the goods are free of a security interest. In that case you'll need to check the Personal Property Securities Register for any security interest on the vehicle: see How to check the Personal Property Securities Register for money owed on property offered to you for sale. (However, if the vehicle was worth less than $2,000 when the seller bought it or took out a loan secured by the vehicle, you will take the vehicle free of any security interest registered on the PPSR.)

What can I do if I have a dispute with a used-car dealer?

You can take a claim to the Motor Vehicle Disputes Tribunal. For example, you may bring a claim to the Tribunal under the CONSUMER GUARANTEES ACT 1993 if the car is defective, or under the FAIR TRADING ACT 1987 if the dealer has engaged in misleading advertising.

The Tribunal can make any award or order that is available under the CONSUMER GUARANTEES ACT 1993, the FAIR TRADING ACT 1987 or the SALE OF GOODS ACT 1908.

The Tribunal can hear claims against traders for up to $50,000 (or higher, if both you and the trader agree).

You can take your dispute to the Tribunal even if you have agreed with the dealer in the contract of sale that you will not do so.

How do I apply to the Tribunal?

There's a special form for applying to the Tribunal. You can get a copy from your local District Court. When the Tribunal has received your application, it will send a copy to the trader, and direct the trader to discuss your claim with you. The trader must report in writing to the Tribunal within two weeks (or any longer period that the Tribunal allows) on whether you've been able to settle the dispute or whether you wish to take the dispute to the Tribunal.

If after the discussions you do wish to go to the Tribunal, you will have to pay any required fee and the Tribunal will then fix a time and place for a hearing and notify both sides of this.

What happens at the hearing?

Each Tribunal consists of an adjudicator, and one assessor to help the adjudicator with technical and mechanical issues. The adjudicator makes the decision in each case.

Hearings are in private and are informal. Lawyers are not permitted. The parties appear on their own behalf, except that you can have a representative (not a lawyer or professional advocate) present your case for you if:

  • you are under 20, or
  • you cannot be at the hearing, or
  • you are unable to present your case adequately, or
  • for some other reason the Tribunal adjudicator thinks you should have a representative

The Tribunal can accept any piece of evidence or information, regardless of the rules of evidence that apply in courts.

The Tribunal's decision

The Tribunal adjudicator will give a written decision, including reasons.

You can enforce the decision by lodging it with the local District Court. It then becomes enforceable as if it were a District Court order.

You cannot lodge the decision with the District Court until the time for appealing has passed with no appeal being lodged.

What can I do if I'm not happy with the Tribunal's decision?

You can appeal the decision to the District Court. You have 10 working days after being notified of the decision to do this.

The grounds available for an appeal depend on the amount of your claim, as follows:

  • If your claim is not more than $12,500, you can bring your appeal on the ground that the procedure was unfair to you and prejudicially affected the result.
  • If the amount is more than $12,500, you can appeal on the ground that
  •  
    • the decision was wrong in fact or in law, or both, or
    • the procedure was unfair to you and prejudicially affected the result

You cannot appeal the District Court's decision.

Cautionary notes
  • Although no lawyers are permitted at hearings of Motor Vehicle Disputes Tribunals, you may wish to consult a lawyer to help you prepare your case. A lawyer will also be able to advise and represent you if you appeal the Tribunal's decision to the District Court or take other action in the courts.


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