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This guide is intended to provide you with information only. If you have a legal problem, you should get legal advice from a lawyer. Legal Aid Queensland believes the information provided is accurate as at June 2020 and does not accept responsibility for any errors or omissions.
This guide provides general information about car contracts, finance contracts and insurance policies when you are buying a used car. It tells you:
It also provides you with:
Use this guide if you:
Do not use this guide if you:
You should use this guide along with legal advice. Never make any legal decisions without speaking to a lawyer first.
You can get legal advice from:
You will get the most out of your legal advice if you do some preparation beforehand. Have all the relevant paperwork together so you can give the lawyer accurate and detailed information. Before you meet with a lawyer try to:
A contract is an agreement between two or more people. When you buy a car you may be asked to sign a contract, which is a record of the agreement (or part of the agreement) you make with the motor dealer.
It is important the information in the contract is clear. If a contract is clear, it will be ‘binding’. This means it is legally enforceable and you must do what it says.
Sometimes a contract will not be binding if the information isn’t clear or accurate, or if the buyer was forced or pressured into signing the contract.
If you are not sure if you have entered into a contract, if it’s legally binding or if you can get out of it, you should ask a lawyer to look at it.
No. Some contracts may be called an ‘order form’. Don’t be fooled—once you sign it, you might not be able to get out of it. The title on the first page may not accurately reflect what the document actually is. You need to read the document and understand its terms to work out if it is a contract.
If you bought a car privately (rather than from a motor dealer) then the contract may not have to be in writing and does not have the same protections as if it was bought from a registered motor dealer under the Motor Dealers and Chattel Auctioneers Act 2014 (this will now be called ‘the Act’ throughout this guide).
There are also different requirements in the Act that apply to buying unregistered or repairable write-offs.
Otherwise, 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 include specific information, such as your right to a cooling-off period if it is a used car. The 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. See page 9 of this guide for more information about what documents the motor dealer should give you when you buy a used car.
No. If you told the motor dealer you were going to buy the car but then change your mind, you do not have to buy it.
The only time you have to buy the car is when you have a signed contract.
If you did not sign anything, you do not have to buy the car.
A conditional contract is when certain things must happen before the contract becomes binding (ie legal). The wording on the contract is usually “subject to…”.
Common conditions are:
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 you need to notify the motor dealer in writing by 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 the contract details are not clear (eg if it doesn’t state the finance amount, the date to get finance approved by or the type of finance). Leaving these important details out could make the contract uncertain and means the contract may not be enforceable.
If you are unsure about your contract, you should get legal advice.
If you paid a deposit when signing a contract, then you have agreed to buy the car. If you go ahead with the sale, the motor dealer takes away this amount from the vehicle’s sale price. If you end the contract, the dealer may keep some or all of your deposit. This depends on the contract’s terms.
Sometimes a motor dealer will ask you to pay a deposit to hold the car for an agreed amount of time while you make your decision about whether to buy it. This is called a ‘holding deposit’. They should give you a receipt for this holding deposit. You can get this deposit back if you decide not to buy the car. Before agreeing to a holding deposit, read what you are signing carefully to make sure you are not paying a deposit to purchase the car.
If you never meant to agree to a contract and believed you were paying a holding deposit only, get legal advice about what to do next.
Before you sign the contract, the motor dealer must give you a notice that includes:
The sale contract must be in writing and must include:
If the car is registered then the seller must provide (at their expense) a current safety certificate. This certificate is prepared at an Authorised Inspection Station and certifies the car meets the requirements for it to be on the road. It is not proof the car is mechanically sound. If the certificate is defective then you should get legal advice about whether you can take legal action against the seller and/or the motor mechanic. You can also make a complaint to the Department of Transport and Main Roads (phone 132 380 or visit www.tmr.qld.gov.au).
You should also be told if the car is a ‘repairable write-off’. This means it has been written-off due to damage and has then been repaired and re-registered (see About the car of this guide for information about buying flood affected cars and for information about hail damaged cars).
If you have not been given the proper documents or notice about your rights, including the cooling-off period, you should get legal advice as you may be able to get out of your signed contract. Time limits may apply so you should get legal advice quickly.
If a licensed motor dealer does not provide these documents to you they have committed an offence. You should make a complaint to the Office of Fair Trading (OFT) (phone 13 74 68 or visit www.qld.gov.au/law/fair-trading/).
A cooling-off period is a timeframe when you can cancel a contract without a reason. If you choose to do this, you may lose some of your deposit if the deposit was ‘non-refundable’.
The cooling-off period usually starts when the contract is signed. The cooling-off period for buying a used vehicle from a motor dealer is about one business day. The cooling-off period will usually expire at the close of business on the following business day. If the motor dealer is not open for a full business day on the following day, then the cooling-off period expires on the close of business on
the day after. A business day cannot be a Sunday or a public holiday.
There is no cooling-off period if you:
Taking a car for a test drive or getting a mechanical inspection done on the car is not counted as ‘taking possession’ of the car.
You can cancel the contract if:
If you are within the cooling-off period you do not have to give a reason for cancelling the contract.
If you want to cancel the contract you must give written notice to the motor dealer before the cooling-off period ends asking them to cancel the contract (see sample letter 2). However if the motor dealer closes earlier than 5pm, then you have until the next day they are open to deliver the letter.
If you want to cancel the contract and you are outside the cooling-off period, you will need to be able to prove a condition of the contract has not been met, and you will need to act quickly
If you believe you are within your rights to cancel the contract, you should:
If all the contract conditions have been met but you still want to get out of your used car contract after the cooling-off period has ended, the motor dealer is entitled to claim damages from you for breaching the contract. Used car contracts often include standard terms that allow the motor dealer to claim a percentage of the purchase price if you do not go ahead with the contract after it is signed. Get legal advice to understand your options.
There are many ways to get finance to buy a car, and your rights and obligations may change depending on the option you choose.
For more information, visit www.moneysmart.gov.au
If you are not sure about your rights and obligations for the finance you have chosen, you should get legal advice.
No, you can get finance from any bank or finance company. A car is a big investment, and you should shop around and get the best deal possible.
Look at the car contract to see if it says ‘bank’ or ‘finance’ and double check if the motor dealer has automatically included finance through their own finance company.
You may be able to get a better deal with your own bank or somewhere else.
If your contract is ‘subject to finance’, it will most likely include a due date (or number of days) you have to get finance approved by.
If your application for finance is rejected, you need to let the motor dealer know in writing before the finance due date (see sample letter 4). If you don’t let the motor dealer know, the contract may become legally binding. A lawyer can look at your contract and give you advice about this.
If the contract does not have a finance due date, you should give your letter to the motor dealer as soon as you can. You should also attach a copy of the rejection letter from the finance company.
If there are delays in getting finance approved and you still want to buy the car, you should write to the motor dealer asking for more time.
After signing a contract, you must make a proper effort to get finance by applying to more than one finance company. You should apply to up to three companies.
If you make no effort to apply for finance, you may lose your deposit or the motor dealer may sue you and force you to complete the purchase or pay damages.
Some motor dealers may accept a finance refusal from one company as being sufficient grounds to cancel the contract, or they may expect you to approach extra companies if the first one refuses your finance application.
If your contract lists the bank or finance company you are going to get a loan from (ie the motor dealer’s finance company), you only have to apply to that one.
If you receive a finance offer, but think you might not be able to afford it, you can decline the offer.
You may not be able to afford the finance because:
If you can’t afford the finance you have been offered, you should:
If you get finance approved, but then realise you can’t afford the loan, you can still ask the finance company to reconsider their decision.
You should write a letter to the finance company including information about your income and expenses and why you can’t afford the loan (see sample letter 5).
When your finance is approved, your bank or finance company should give you the following documents:
If you do not receive all of these documents, you may be able to get out of your finance contract. You should get legal advice about this.
The finance contract must match what the motor dealer offered you. If it is different to what you were expecting (or different to what you were told), you may be able to get out of the contract. You should get legal advice if this happens.
If you cancel your car contract, you need to cancel all of the other contracts, including your finance contract.
If the motor dealer arranged your car finance or referred you to the finance company, then the finance contract will automatically be cancelled when the sales contract is cancelled (this only applies for cars bought for personal use).
If you arranged your own finance, you should call the bank or finance company and tell them you want to cancel the contract because the sales contract has been cancelled.
Car insurance can be confusing. Start by checking your car contract and your finance contract to see if insurance is already included. Remember, motor dealers and finance providers have an interest in selling you insurance because they usually get paid a commission. If they sell you insurance that is not needed, you may be able to cancel the policy and get a refund.
All cars have compulsory third party (CTP) insurance included in their registration, which covers the cost of injuries caused to another person in an accident where you are at fault. Most people also go to an insurance company to get fully comprehensive insurance, so if their own car is damaged in an accident, the cost of the repairs is covered.
Your finance company may insist you get extra insurances and suggest an insurance company. However, you can decide which extra insurances to get and which company to use. If you already have house and contents insurance, you might find it’s cheaper to use the same company for your car insurance. But sometimes, if you shop around you might find another company offering cheaper and better insurance.
Your car registration includes CTP insurance. This insurance covers the cost of injuries to the other person (called the third party) involved in a car accident where you were at fault. It does not cover you for any injury. It does not cover damage to any car or personal items stored in the car. It is illegal to drive on public roads without this insurance. When you pay or renew your registration you can choose which company you want to provide this type of insurance.
This covers you for damage your car might cause to someone else’s vehicle or property, which could be very costly if you have an accident that is found to be your fault. It does not cover the cost of repairing damage to your own vehicle. There may be limited cover if the other person is at fault and uninsured.
This covers you for damage to your vehicle (regardless of who caused it). This means if you are in an accident, you only have to deal with your insurance company to get your car repaired regardless of who caused the accident.
Gap insurance covers the difference between what you owe on your car and what your insurance company says it’s worth. If your vehicle has been written-off in an accident, your insurance company usually pays the cash value of your car, which may be less than the amount you still owe on your loan.
The difference between your insurance payout and your current loan amount is the ‘gap’ you can be left owing. If the comprehensive motor vehicle property insurance is enough to pay the loan, then the gap insurance won’t pay anything.
If the car owner dies, life insurance can be used to pay the amount left owing on the car loan.
If you have a disability or can’t work, this insurance may cover all or part of your car loan. There are certain requirements and exceptions about when you can claim it.
If you lose your job, your unemployment insurance may pay your car loan for a short period (usually three months).
If you were told you had to take out an additional insurance (other than CTP insurance), or were told you had to use a certain insurance company, you should get legal advice about your options.
You have a 14 day cooling-off period to cancel an insurance contract, so if you believe you were forced to take out the insurance you need to act quickly to cancel it.
If you choose to cancel your car contract, then you need to cancel your insurance policy too.
If the motor dealer arranged your insurance, then the policy will automatically be cancelled when you cancel your car contract.
If you arranged your insurance, you will need to call the insurance company and tell them you want to cancel the policy.
If your car breaks down not long after you bought it, and it is covered by a statutory warranty, you may be entitled to have it repaired. A statutory warranty is a guarantee certain defects with your car will be fixed by the motor dealer—free of charge, within a certain time.
There are two types of warranty:
Class ‘A’ — Has travelled less than 160,000km or the build date is less than 10 years oldThe warranty period starts when possession is taken and ends when the vehicle travels 5000km or three months after you take possession — whichever happens first.
Class ‘B’ — Has travelled more than 160,000km or the build date is more than 10 years old
The warranty period starts when possession is taken and ends when the vehicle travels 1000km or one month after you take possession — whichever happens first.
A warranty is applied by law to any vehicle sold by a licensed motor dealer that:has travelled less than 160,000km, and is less than 10 years old.
The warranty will not apply to:
The warranty will not cover a defect in:
A statutory warranty does not replace a mechanical inspection prior to purchase. You should still get the mechanical inspection. For example, a car may have a fault that is not going to appear during the warranty period, or is not covered by a safety certificate, but that may cause major problems later.
The warranty will not cover any damage to the car that occurs after you take possession of the car. The warranty also won’t cover defects that occur as a result of the buyer’s misuse or negligence.
If you believe the car has a defect, you must:
Once the motor dealer has received your letter they have five business days to let you know if the defect is covered by the statutory warranty. If the motor dealer does not respond to your letter, then by default the motor dealer has accepted the defect is covered by the statutory warranty.
A vehicle must be repaired within 14 days after the motor dealer accepts the defect is covered by the statutory warranty, unless the motor dealer has a reasonable excuse. The warranty period is extended by one day for each day or part of a day the motor dealer or repairer has the vehicle.
If the dealer rejects that the defect(s) is not covered under warranty, you can apply to the Queensland Civil and Administrative Tribunal (QCAT). Please get legal advice.
Once the defect has been repaired, the motor dealer has fulfilled their responsibility to repair the vehicle. If you don’t get the result you want, you should get legal advice. You may need to make a claim through the Queensland Civil and Administrative Tribunal (QCAT).
You should first approach the motor dealer and try to resolve the issue. Each motor dealer is required to provide a complaints handling procedure under the Code of Conduct. If this does not solve the problem, you can make a complaint to the Office of Fair Trading by calling 13 74 68 or visiting www.qld.gov.au/law/fair-trading/ and typing ‘make a consumer complaint’ in the search box.
If the motor dealer has:
When you buy a car it must be fit for the purpose it was sold. It must also be of ‘acceptable quality’ that is judged based on how much you paid for it.
What is ‘acceptable quality’?‘Acceptable quality’ means the quality and description of the car is appropriate for the car’s purchase price. For example, a higher standard is expected for a car that costs $15,000 than one that costs $5000. Any representations about the car made by the supplier or manufacturer about the car are also relevant.
If the car had a defect when you bought it that makes it unfit for driving, and the defect is unreasonable considering the price you paid, you may have a claim against the motor dealer. You need to be able to prove this and you must act quickly. Ask an independent mechanic to inspect the car and whether they can honestly state the problem was there when you bought it. Then write to the motor dealer explaining the problem.
If you can show the defect was there on the day the car became legally yours and it is a serious defect, then you may be able to end the contract and return the car. If it is a less serious defect, then you may be entitled to claim some compensation for the defect. If the motor dealer doesn’t agree with you, you may need to take the matter to court
You can apply to QCAT for the dealer to repair the defect if the amount or value sought is no more than $100,000. You should get legal advice if you need to take the matter to QCAT.
Cars that have been under water during a storm, cyclone or flood are prone to mechanical problems in the future and have a high risk of rust damage.
Severely flood affected cars are ‘written-off’ meaning they are never allowed to be registered, driven or sold.
Less severely damaged cars are considered ‘repairable write-offs’ meaning they can be repaired, undergo an inspection, then be sold again.
The best way to find out if the car you are about to purchase has been in a flood is by organising RACQ or an independent mechanic to inspect the car for signs of flood damage.
Visit the RACQ website www.racq.com.au for information on flood damaged cars and signs to look out for.
If you discover after you purchase a car that it has been in a flood you should quickly get legal advice about your options.
You should also be very careful when considering buying a hail damaged car. Important issues to consider include:
In some circumstances you may be able to end the contract and seek damages. You should get legal advice.
If the motor dealer does not satisfactorily address the problem, then make a complaint to the Office of Fair Trading (OFT). You can make a complaint to the OFT by calling 13 74 68 or visiting the website www.qld.gov.au/law/fair-trading/ and typing ‘make a consumer complaint’ in the search box. Their officers will investigate your complaint which may lead to:
If you have lost money because of a motor dealer’s actions, you can make a written claim for compensation from the OFT’s Claim Fund. Claims should focus on untrue information the motor dealer told you about a vehicle or other breaches of the Act.
You should lodge your claim for compensation within one year of becoming aware of the loss, or within three years of the event that caused the loss, whichever happens sooner.
The OFT decides simple or straightforward claims—it may refer more complex claims to QCAT. The OFT’s decisions can be appealed in the QCAT. You have 28 days to file a review of the OFT’s decision. Decisions by the QCAT can also be appealed.
The QCAT will consider the ‘bargaining positions’ of you and the motor dealer (ie who had more power during negotiations about the car) by looking at whether:
The tribunal will also look at the cost of identical or equivalent goods from another motor dealer and then decide if your motor dealer did not act properly.
If there is a problem with your car and your motor dealer offers to swap it for another car, you do not have to take the other car offered.
If you do accept another car, the motor dealer must write up a new contract or change the original contract. If the original contract is changed, you and the motor dealer need to sign the changes.
Talk to a lawyer to help you write your letter/s to your finance company and/or motor dealer.
Applicant — the person who asks the court to do something by filing an application.
Auction — An auction is open to the public and the person willing to pay the most buys the car. This sale is unconditional, which means you need to have your money ready to pay for the car. Many of the things that protect you in other forms of sale (ie sale after inspection at a motor dealer) are not available. There is no cooling-off period.
Binding — If a contract is binding it means it is enforceable. Legally, you must go through with buying the car or you may lose your deposit and the motor dealer may make a claim against you to complete the purchase or pay damages.
Contract — A contract to buy a car is a written agreement between two parties to sell a car. A contract may sometimes be called an order form.
Cooling-off period — A cooling-off period allows you to cancel your used car contract without a reason, within one business day from when the contract is legal. You could lose some of your deposit if you cancel within the cooling-off period.
Damages — Damages is the amount of money a motor dealer may lose if you don’t buy the car, such as the difference between the price you paid and a lower price someone else might pay for the car.
Implied — If something is implied in a contract it means it’s included even if it is not written in the contract. Some conditions or terms of a contract are implied by government regulation even if the contract does not state the terms.
Legal disability or incapacity — A legal disability (which can also be called ‘legal incapacity’) may stop you from entering into a contract or be the reason a contract is not binding. You can be classified as having a legal disability if you:
Legislation — When buying a car there are certain laws (called legislation) that protect you and the motor dealer. In this guide we refer to some of this legislation. You do not need to know what all the relevant laws mean but a lawyer advising you might refer to them. The laws are:
State Acts of Parliament can be viewed at www.legislation.qld.gov.au
Motor dealer — A motor dealer is a person who sells vehicles. They can also be called a motor vehicle dealer, car dealer, or dealer. A one-off sale of a car is called a private sale and does not mean the seller is a motor dealer.
Conditional contract — A conditional contract is where something else must happen before it is binding. For example, the motor dealer may be waiting for the car to be sold to them before they can sell it to you. This means the contract cannot be completed until the first sale happens. Sometimes you have to do something (such as get finance approval) before the contract is binding. Ask a lawyer if you have to make the effort to meet the condition or if you can say there is no contract yet.
Statutory warranty — A statutory warranty, sometimes called a warranty, is a guarantee certain defects (problems) with your car will be fixed by the motor dealer within a certain time. Some things that go wrong with your car may not be covered by the warranty. The Motor Dealers and Chattel Auctioneers Act lists the things that are and are not covered under a warranty.
Legal Aid Queensland gives legal help to financially disadvantaged Queenslanders.
Call Legal Aid Queensland on 1300 65 11 88 (for the cost of a local call from a land line in Australia) to get free legal help for your legal problem.
The Legal Aid Queensland website has useful information and free factsheets and guides about a range of legal issues. Visit www.legalaid.qld.gov.au
Visit www.atsils.org.au or call 1800 012 255 or (07) 3025 3888.
Visit www.legalaid.qld.gov.au or www.communitylegalqld.org.au or call 1300 65 11 88 to find services in your area.
Visit www.qls.com.au or call the Queensland Law Society on (07) 3842 5842 for names of lawyers who specialise or who are accredited in civil law.
The Office of Fair Trading (OFT) provides information about buying used and new cars, resolving disputes with motor vehicle repairers and handles complaints about motor dealers breaching their Code of Conduct.
Visit www.qld.gov.au/law/fair-trading/ or call 13 74 68.
This register has information about registered security interests over personal property, including cars.
Visit www.ppsr.gov.au or call 1300 007 777.
Visit www.qcat.qld.gov.au or call 1300 753 228.
The Queensland Ombudsman investigates complaints about decisions and actions of Queensland’s public sector agencies, including motor vehicle registration, licences and road maintenance.
Visit www.ombudsman.qld.gov.au or call 1800 068 908.
RACQ provides a range of motoring services and independent advice. This includes information on car prices, road safety and motoring advice, new and used car reviews, repairs and maintenance advice, driver education and towing.
Visit www.racq.com.au or call 13 1905.
The Australian Financial Complaints Authority offers dispute resolution over complaints about financial services, including general insurance.
Visit www.afca.org.au or call 1800 931 678.
Last updated 20 July 2022