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Global car companies driving home lemons

CHOICE says time to scrap non-disclosure agreements that hide new car problems

14 March 2016

Research by consumer advocacy group CHOICE has revealed the world’s biggest car companies are forcing consumers to sign non-disclosure agreements before granting them access to basic legal rights.
Worryingly CHOICE found 16% of consumers who had problems with their new cars were made to sign confidentiality agreements in order to have a faulty vehicle replaced or refunded[1], with owners forced to pay an average of $1295 to fix problems with new cars[2] that should be covered by the Australian Consumer Law.
“This research shows that car companies are trying to cover up the scale of problems with new cars by forcing consumers to sign non-disclosure agreements in order to get problems fixed,” says CHOICE CEO Alan Kirkland.
“This practice is totally unacceptable when cars are such a significant purchase and problems may relate to vehicle safety.
“This information should be in the public domain, available to consumers and regulators, and it’s time this power imbalance was addressed,” Mr Kirkland says.
When it came to complaints, the research revealed Holden was the worst performing car company (68% of Holden owners experienced problems with their new car), followed by Ford (65%). No car brand had an incident rate of less than 44% problem cars.
“When it comes to a major failure, remedies are not provided at the discretion of the seller. The fact is these companies have a legal obligation for their cars to be of acceptable quality and free from defects,” says Mr Kirkland.  
CHOICE found two thirds of all new car buyers (66%) reported that their cars experienced problems in the first five years.[3]
“While the majority of these issues were minor, 14% of new car owners faced major problems that either caused the car to stop working or seriously impaired the operation of the car,” Mr Kirkland says.
“While some companies are doing the right thing, others are treating consumers’ statutory rights to replacements, refunds or repairs as an optional extra.
“The research findings convey the very real sense that car companies are off-loading sub-standard new cars on consumers and then using lawyers to fight consumers, forcing them to pay more to have their new cars fixed.
“It is also concerning that some consumers reported dealers appearing to deliberately avoid acknowledging problems until after the dealer warranty period expired.
“When investing tens-of-thousands of dollars in an expensive new car, consumers should be confident that it will work,” says Mr Kirkland.
The research comes ahead of the review of Australian Consumer Law this year, and raises the question of whether consumers are able to exercise their rights adequately under Australia’s existing law.

The full report on lemon cars is available here.
Quick facts

  • Consumers who experience a major defect in a new car are entitled to choose between having it repaired or replaced under the Australian Consumer Law
  • 14% of new car owners have had major problems with their vehicle
  • The worst performing brands were Holden and Ford
  • Many consumers report problems obtaining refunds or repairs.
  • When car manufacturers do fix problems, they often force consumers to sign confidentiality agreements to cover up what is going on.
  • Consumers may have rights to remedies for many years after dealer warranties expire, due to the operation of the consumer guarantee provisions.
The research 
The research was conducted among a nationally representative Australian population sample. 1,505 Australians completed the online survey in-field from 25 December 2015 to 21 January 2016. The survey was hosted by GMI Lightspeed.
[1] Base: n=985 car owners who had a problem with their new car. Q: Have you signed/been asked to sign a confidential agreement that prevents you from disclosing details about the refund or replacement offered when resolving the problem with your new car?
[2] Cost of time calculated using the average hourly wage within the total Australian population – including workers and non-workers ($14.10).
[3] Base: n=1,505 car owners who answered the survey. Q: Have you experienced any of the following types of problems with your new car in the last four years?

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