What you need to know about your car and lemon laws in Australia

Craig Duff

Posted September 27, 2022

Occasionally, motor vehicle buyers will find they have purchased a 'lemon' - a car that isn’t fit for purpose. How do you know if you've bought a lemon, and what can you do about it?

When life gives you a lemon, seek lemon-aid.

Australia, unlike the USA, doesn’t have a specific “lemon law” but a raft of legislation does protect buyers of both new and used vehicles.

There is no legal definition of a “lemon” in Australia, but the 'pub-test' defines a lemon as a product with a persistent defect that prevents it from living up to expectations.

In other words - the item doesn’t do the job it’s meant to do. This applies to both new and used vehicles. It’s not that the type of product is inherently bad, you’ve just (unluckily) received a poor example of it.

Help is at hand, however, in the form of the federal Australian Consumer Law and, in Victoria, Consumer Affairs Victoria (CAV).

CAV reports it received 2,804 contacts related to used car sales by licensed motor car traders in 2021-22, compared to 2,581 in 2020-21, and 3106 in 2,019-20.

“If you do purchase a vehicle that doesn’t work, you are entitled to a refund, replacement, or repair under the Australian Consumer Law - regardless of whether the vehicle is new or used,” said a CAV spokesperson.

“We take breaches of motor car trading laws very seriously and will take action where wrongdoing is identified.”

Consumer law extends beyond the warranty

All new vehicles are required to comply with Australian standards and most brands are covered by a five-year (or longer) warranty.

BMW/Mini is the only hold-out in the major mainstream ranks and persists with a three-year warranty.

Essentially, buyers will first approach the dealership under a warranty claim. If the dealer is then unable to repair the problem, or it becomes an ongoing issue, owners can be granted a refund. If that is refused, buyers can seek redress through the courts under the provisions of consumer law.

Australian Consumer Law takes precedence and may still apply even if a vehicle is out of warranty.

According to business.gov.au, “a business’s warranty can’t override the consumer guarantees. For example, if a product suffers a failure outside a warranty period, it may still be covered by consumer guarantees.”

“If you’re a supplier or manufacturer and provide such a warranty, under the ACL you must comply with that warranty. If you fail to comply with a warranty, consumers have rights against you under the consumer guarantees.”

In Victoria, there is also a statutory warranty for second-hand vehicles. If the vehicle is less than 10 years old and has travelled less than 160,000km, buyers are entitled to a three-month/5,000km warranty.

The caveat here, is that warranty only applies if you are buying a vehicle from a licenced motor car trader, so it explicitly doesn’t apply to private sales.

A man standing by a car i n the desert.

Even the highest-regarded car company can produce the occasional lemon.

What to do if you’ve bought a 'lemon'

If the vehicle is demonstrably faulty, owners have a right to ask for a repair, replacement, or refund under Australian Consumer Law. If the problem with the product or service is minor, you must accept a free repair if the retailer offers you one.

If, however, the issue is major, owners can request a replacement or refund.

The replacement must be of an identical type to that originally supplied and refunds should be the same amount you have paid and in the same form.

It’s worth noting you are dealing with the dealership at this point, not the manufacturer.

If a business sold a product or service to a consumer, "[the business] cannot refuse to help by sending them directly to the manufacturer or importer for a remedy. This applies even where the fault was caused by the manufacturer”.

“[The business] can approach the manufacturer or importer directly; however, you will only be entitled to recover costs from them. You cannot demand a repair, replacement, or refund from the manufacturer.” 

Anyone who has an issue with a car purchase or defects is encouraged to contact Consumer Affairs Victoria via their website or by calling 1300 55 81 81.

The Victorian Civil and Administrative Tribunal (VCAT) is also authorised to hear cases where buyers seek to cancel the sale of a vehicle they’ve bought. That application must be lodged within three months of the purchase date and only applies for vehicles valued at up to $40,000.

The Australian Competition and Consumer Commission (ACCC) is the national consumer watchdog and the place to go if you can’t get satisfaction any other way.

This will require you to have documented all your interactions with the dealership or car company.

At this point, you’re probably talking about a legal resolution, which can be timely and expensive.


The information provided is general advice only. Before making any decisions please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit racv.com.au. As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product(s) issued by Insurance Manufacturers of Australia ABN 93 004 208 084 AFS Licence No. 227678.