On this page:
What is a contract?
A contract is an agreement between two or more people. When you buy a car you may be asked to sign a contract, which records the agreement or part of the agreement you make.
It is important the information in the contract is clear. Sometimes a contract will not be binding if the information isn't clear or accurate, or if the buyer was forced to sign the contract.
If you are not sure if you have made a proper contract, if it's binding or if you can get out of it, ask a solicitor to look at it.
Is a contract always called a contract?
No. Some contracts may be called an order form. Don't be fooled. It may be a contract you can't get out of. The title on the first page may not be what the document is about. You need to read the document and understand its terms to work out if it is a contract.
Does a car contract have to be in writing?
Yes, the contract must be in writing. If the contract is not in writing you do not have to buy the car. It must also contain specific information, like your right to a cooling-off period if it is a used car. The Property Agents and Motor Dealers Act states what information must be in a contract.
If a motor dealer sells you a car, they must give you a copy of the contract straight after you sign it.
What if I signed a contract but it is conditional?
A conditional contract is when certain things must happen before the contract becomes binding. The wording on the contract is usually "subject to..". Common conditions are:
- Finance must be approved.
- The car must pass an inspection to your satisfaction.
- The dealer has to buy the car from a previous owner in order to sell it to you.
If your loan is not approved or you are not happy with the inspection, you do not have to go through with buying the car. The contract will give a timeframe or date by which you need to notify the motor dealer in writing (see sample letter 2 on the sample letters page) about the outcome of the conditions and whether you are going to go ahead and buy the car.
Sometimes it is possible to get out of a contract if it is not clear enough about the details. For example, if the contract does not state the finance amount, the date to get finance approved by or the type of finance, then the contract may be so uncertain that it may not be binding.
If you are unsure about your contract, ask a solicitor to look closely at the wording to see what your rights are.
Do I have to buy the car after I've expressed interest in it?
No, the only time you are obliged to buy the car is when you have a legal contract. If you did not sign anything, you do not have to buy the car. If you just talked to the dealer, even if you said you were going to buy the car but now you do not want to, you do not have to buy it.
What if I've paid a deposit?
Sometimes a dealer will ask you to pay a deposit to hold (not sell) the car for an agreed amount of time while you make your decision about whether to buy it. They should give you a receipt for this deposit and you can get it back if you decide not to buy the car.
If you paid a deposit when signing a contract, then you may have to go through with the deal. If you are not sure about whether you gave a holding deposit or a deposit as part of a signed contract, look at the paperwork you were given and ask a solicitor. If you never meant to agree to a contract and believed you were paying a holding deposit only, ask a solicitor for advice about what to do next.
What documents should the dealer give me when I buy a used car?
When you sign a contract to buy a car, the motor dealer must give you:
- a copy of the contract straight after you sign it
- a statement about the previous ownership of the car
- notice about the car's statutory warranty, if any (this is a guarantee that certain problems with the car will be fixed during the term of the warranty)
- a written notice about the cooling-off period,which is a form that both buyer and seller sign
- a security interest certificate on the day the ownership transfers to you showing no one else has a registered financial interest in the car (called a bill of sale or mortgage)
- a form providing a description of the car, including the make, model, year of manufacture and odometer reading
- a safety certificate (previously known as roadworthy certificate)
- documents explaining all the details of your loan (called 'disclosure documents') if you are applying for finance.
What happens if the dealer does not give me all of this information?
If you are not given written notice about the cooling-off period (used cars only) or given the statement identifying the vehicle then you have up to seven days after the car is legally yours to cancel the contract.
If the motor dealer doesn't give you all the other documents mentioned above, it may mean the contract is not binding. Ask a solicitor for advice. If you want to complain about the motor dealer, call the Office of Fair Trading on 13 1304.
Can I cancel the contract?
You can cancel a contract by:
- using the cooling-off period if you are buying a used car
- showing a condition in the contract was not met eg the contract had the condition that the car would be inspected to your satisfaction and the car failed the inspection.
- arguing the person who signed the contract was not legally eligible to sign it
- proving the car was not mechanically safe or was not fit for the purpose it was bought
- proving the seller told you something about the car that wasn't true and you signed the contract based on that fact, eg you were told the car was manufactured in a certain year and you wouldn't have bought it if you had known this wasn't true
- showing the motor vehicle dealer did not do what was required under the Property Agents and Motor Dealers Act.
Most ways to get out of a contract depend on you doing something quickly. You will need to get a solicitor to look carefully at your contract to work out whether you can get out of it.
What is the cooling-off period? (used cars)
A cooling-off period is when you have a chance to cancel a contract without a reason, but you may lose some of your deposit if the deposit was 'non-refundable'.
There is no cooling-off period if:
- you bought the car privately (not from a motor dealer)
- you bought a new car
- you bought the car on consignment
- you bought the car at auction
- you have driven the car away from the car yard other than for a test drive or inspection.
The cooling-off period starts when the contract is legal and lasts for one business day. Sometimes certain things have to happen before the dealer can sell the car to you, for instance the dealer may need to buy the car from the previous owner. In this case, the cooling-off period starts later.
The motor dealer must notify you of your right to cancel the contract during the cooling-off period. They should give you a form called a PAMDA Form 37a that you both sign stating when the cooling-off period starts and ends. If they did not give you this form, you have seven days after the car becomes legally yours to cancel the contract.
If cancelling the contract during the cooling-off period, you must give a letter to the motor dealer by close of business on the next day they are open (see sample letter 6 on the sample letters page).
If the motor dealer closes earlier than 5 pm then you have until the next day they are open to deliver the notice.