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Calls for car ombudsman to resolve 'lemon' vehicle disputes

Victorian consumer advocates are calling for action on the high number of complaints about dodgy cars.

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Last updated: 08 December 2021
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Need to know

  • Consumer Action says it's received more than a dozen complaints about a single Melbourne used car dealership
  • Customers we spoke to say their cars had faults almost immediately after they bought them
  • Consumer advocates are calling for an ombudsman service to resolve the high number of motor vehicle disputes 

When Tim McKenzie first bought a 2008 Holden Omega from a used car dealership in Melbourne in 2019, he was excited to have a shiny new vehicle to drive. But he didn't get far. Within 45 minutes of leaving the car yard, the engine light came on and the car broke down.  

Two years on, he says the vehicle has caused him nothing but trouble.

"I don't regret a lot in life, but I definitely regret buying a car from a company that didn't look after me and took full advantage of a guy with a great credit rating," he tells CHOICE.

"They definitely took advantage of a guy who wasn't a mechanic, who didn't know a lot about cars."

Paying $14,000 for an $8000 car?

Tim says the finance arrangement was never properly explained to him. Through an arrangement offered at the dealership in partnership with Latitude Finance, Tim ended up owing about $14,000 on a car that cost less than $8000 without the financing. (At CHOICE, we gave Harvey Norman a Shonky Award in 2020 largely thanks to its relationship with Latitude Finance.) 

The car broke down multiple times over the years and Tim turned to payday lenders to cover the cost of making repairs.

Being as I had a good credit rating, I went through same-day lenders. It was quite easy to get the money, but it made me more in debt

Tim McKenzie, Melbourne car owner

"After the second breakdown, I think I had $50 in my pocket at the time," he says. "Being as I had a good credit rating, I went through same day lenders. It was quite easy to get the money, but it made me more in debt." 

Tim says he feels unsafe driving his daughter around in the car, and that the vehicle and associated debt have sent him into depression.

"I just don't feel comfortable in the car at all, even if it's a short drive," he says. "You shouldn't have to be stressed out to drive a car around, but it is always in the back of my mind." 

'A crappy experience'

Tim McKenzie shares his story of buying a used car from Automax in Melbourne.

Why Tim is far from alone

Consumer Affairs Victoria told us it received more than 2500 enquiries and complaints related to used car sales in 2020–21.

The Consumer Action Law Centre, which has been assisting Tim, says it has received more than a dozen cases relating to Automax, the car dealership Tim bought his car from.

Automax, based in the Melbourne suburb of Dandenong, is owned by CMG Automotive, which claims to be Victoria's largest independent car dealer.

Consumer Affairs Victoria told us it received more than 2500 enquiries and complaints related to used car sales in 2020–21

Consumer Action CEO Gerard Brody tells CHOICE that in response to all the complaints, Consumer Affairs Victoria is now investigating Automax.

"This is a particular car dealer where we have had a number of complaints from people about defects in vehicles and, really, failures of that business to respond to repair requests effectively," says Brody.

CMG Automotive did not respond to the questions we sent.

Worthless warranties

When David Douglas bought his 2011 Peugeot RCZ for $16,000 from Automax in March 2020, he was told his purchase included a $1700 extended warranty from a company called Integrity Car Care. 

But he had issues with the vehicle straight away on the drive from Melbourne back to his home in Canberra. When he got to Canberra, a mechanic quoted him almost $2000 for various repairs. His attempts to get either Automax or Integrity Car Care to pay for repairs have failed. 

"I bought the car believing that I had a warranty," he says. "That's why I went through a dealer."

A broken-down system

Under Australian Consumer Law, buyers of new or used cars are entitled to repairs, a replacement or a refund if there's a major fault, and the customer gets to choose which they want.

But dealerships that don't honour those rights leave customers like Tim and David with little hope for a remedy.  

Brody says the current system for resolving disputes involving motor vehicles, through the Victorian Civil and Administrative Tribunal (VCAT), isn't working for consumers.

The burden of proof falls on the customer, meaning they're often required to come up with as much as $1000 for an independent assessment of the vehicle

The burden of proof falls on the customer, Brody says, meaning they're often required to come up with as much as $1000 for an independent assessment of the vehicle for the tribunal. He says VCAT cases can take up to two years to be resolved.

"People can tend to just give up because it's too expensive [to go through VCAT] and either deal with a car with defects that might be dangerous, or spend more on another vehicle or go without," he says.

Time for an ombudsman

Brody says the ombudsman-based system for handling complaints has worked extremely well for telecommunications, energy and water, and that a motor vehicle ombudsman should be set up to deal with the high volume of complaints.

"Ombudsman services are a really effective dispute body that provides quick and efficient access to justice," he says. 

"Rather than the burden being on the consumer to prove their case, the ombudsman has the expertise to investigate and overcome those proof barriers and make a determination or a resolution."

Consumer advocates drive up pressure

Consumer Action recently partnered with Victorian Aboriginal Legal Service, WEstjustice and Hume Riverina Community Legal Service to call on the state government to introduce an ombudsman body funded by both government and industry.

Although there's currently no motor vehicle ombudsman in any other Australian jurisdiction, Brody says the effectiveness of the ombudsman in other industries has created a model to follow.

"A motor vehicle is one of the biggest purchases a household makes, so it is sort of strange that you've got the access to an ombudsman service for utilities and services, but not for that big purchase like a car," he says.

tim looking under the bonnet of his holden omega

Tim McKenzie with the 2008 Holden Omega he bought from Automax in 2019. Within just 45 minutes of leaving the car yard, the engine light came on and the car broke down.

No response from Victorian government

The Victorian government hasn't responded to consumer groups' calls for a motor vehicle ombudsman.

We sent questions to the state minister for consumer affairs Melissa Horne, asking about the potential creation of a body and whether she thinks the current VCAT system is working well for customers with car disputes. 

She didn't respond to the questions personally. Instead, her office told us: "Consumer Affairs Victoria takes breaches of the law by motor car traders very seriously. 

"In October a former licensed motor car trader was convicted and fined for deceiving consumers after court action taken by Consumer Affairs Victoria and they'll continue to take action where wrongdoing is identified."

'I can't do anything'

Tim McKenzie says he feels stuck with his lemon vehicle now and has thought about going to VCAT, but isn't sure the time and energy will lead to a successful outcome. 

In the meantime, his debts have got so bad he's now considering filing for bankruptcy. All in all, he rues his decision ever to go to Automax in 2019. 

"I wish I had my time again," he says. "I wouldn't have bought this car, I wouldn't go for the same-day lenders. 

"I can't afford to go on holidays, I now have the worst credit rating, I can't go to the bank to get a loan, I can't do anything."

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