'Lemon laws' proposed for Australia

The Federal Government is considering tough new "lemon laws" to better protect buyers of new and used cars.

Australia currently has among the weakest lemon laws in the developed world when it comes to replacing or repairing defective motor vehicles.

For decades, state and federal governments have taken the word of the car industry over the word of the consumer.

The car industry has long argued that vehicle warranties provide customers with adequate protection.

However, while cases of new vehicles being replaced are common in North America, they are few and far between in Australia. Indeed, most manufacturers only agree to replace a vehicle after several months of customer heartache -- and often only if the customer signs a confidentiality agreement. The latter is because manufacturers don't want to create a stampede of other customers who want the same treatment.

When there is a problem in the manufacturing process with clothing or whitegoods, they usually end up in a factory outlet store. But there's no special place for problem cars: they get sold to customers as if they are a faultless new vehicle.

Here's as an example of how the law favours the car makers and sellers, and not consumers. In NSW, a dealer or car maker is allowed to repair up to four panels on a brand new motor vehicle before the seller is obliged to inform the owner of the repairs. And yet if that same vehicle were presented for a trade-in at the same dealership, it would be marked down heavily for being repaired.

Despite receiving dozens of complaints about defective vehicles each year, the NSW Department of Fair Trading, over the past five years, has ordered only a handful be replaced, or part or all of the purchase price be refunded.

The Federal Government estimates faulty goods cost the Australian economy about $12 billion a year.

A report by the Commonwealth Consumer Affairs Advisory Council, and released at the weekend by Consumer Affairs Minister Craig Emerson, showed consumers make 50,000 inquiries and complaints a year about warranties and entitlements on faulty goods.

The report found that many consumers were unaware of their rights.

The report also cited US "lemon laws" as a leading example, protecting consumers against faulty cars.

"[Lemon laws] apply to cars because of the cost of having to take a car back to a dealer time and time again -- lost earnings, time spent in traffic and inconvenience," the report said.

"[In North America] when a vehicle is identified as a lemon, the consumer is entitled to a replacement new vehicle or a refund of the purchase."

In the US, the "lemon law" applies to cars that have undergone multiple repairs under warranty, but whose problems have not been rectified. Compensation includes a refund, a replacement or a form of cash compensation.

The Commonwealth Consumer Affairs Advisory Council is seeking submissions into what changes, if any, need to be made to the Trade Practices Act 1974.

The department is also considering if any changes are required to so-called "lemon laws", to better protect consumers where goods repeatedly fail to meet expected standards. Submissions close on August 24, 2009.

Read the latest Carsales Network news and reviews on your mobile, iPhone or PDA at www.carsales.mobi