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What do I do if my new car turns out to be a lemon?

We explain your rights if something goes wrong with your new car.

broken down lemon car
Last updated: 28 January 2021


Checked for accuracy by our qualified fact-checkers and verifiers. Find out more about fact-checking at CHOICE.

When you buy an expensive new product like a car, you expect it to work. But what happens if your brand-new purchase is plagued with problems? 

We explain your consumer rights and how to get a refund, repair or replacement when a car turns out to be a lemon.  

What is a lemon car?

A lemon car is a brand new car that turns out to be a dud. And they're more common than you might think. 

A 2016 CHOICE report on lemon cars found that two thirds of Australians (66%) report experiencing problems with their new cars in the first five years, with 14% reporting major problems that either caused the car to stop working or seriously impaired its operation.

What are my consumer rights?

Your consumer rights (or consumer guarantees) are separate to the manufacturer's warranty and they have no set end date. 

They apply for the amount of time that a consumer would reasonably expect, given the cost and quality of the item. They also apply regardless of any contract, warranty or non-disclosure agreement you agree to in relation to your new car.

When it comes to new cars, your rights include that the car must:

  • be of acceptable quality (safe, durable and free from defects)
  • be fit for purpose
  • match the description provided
  • have spare parts and repair facilities available. 

Can I get a refund or replacement?

If your new car has a major failure, you can choose between a replacement, refund or repair. 

A major failure is defined as any problem which:

  • cannot be repaired or is too difficult to repair within a reasonable time
  • prevents you from using your car and cannot be repaired in a reasonable time (e.g. car won't start)
  • makes your car unsafe to drive (e.g. braking malfunction)
  • would have prevented a reasonable consumer from buying the car if they'd known the issue would occur

In addition, as of December 2020, if the product has two or more minor failures and you would not have bought the product if you knew the nature and extent of these failures, it can amount to a major failure. (Note: These failures don't need to relate to the same consumer guarantee.) 

Can my car be repaired for free?

If your new car has a minor failure, you must accept a free repair if you're offered one.

A minor failure occurs when your new car can be fixed or the problem can be resolved within a reasonable time. You're entitled to free repair even if the failure doesn't interfere with the safe operation of the vehicle. (However, if the product has two or more minor failures, it can be considered a major failure.)

If the dealer doesn't provide the repair within a reasonable time, you can:

  • take your car elsewhere for repair and recover the costs 
  • request a free replacement or a refund.

You may also be entitled to compensation from the dealer or manufacturer for any loss or damage suffered as a result of a major or minor failure.

Consumer law confusion

A 2017 ACCC report into new car retailing found that new car buyers are having difficulties understanding and enforcing their consumer rights. 

During the sale, dealers focus on the manufacturer's warranty and the upsell of an extended warranty, which can leave consumers in the dark about their inherent consumer rights. 

Your consumer rights are separate to your warranty and they have no set end date

Commercial arrangements between manufacturers and dealers which focus on warranty rights to the exclusion of consumer guarantees limit dealers' ability to provide a refund, replacement or repair. 

This means that when people experience a problem with their new car, they often don't receive the remedy they're entitled to.

Why we want a 60-day refund policy

Issues with consumer complaint handling have been identified across the industry, but high levels of complaints against Holden and Volkswagen led to a legally binding agreement with the ACCC that goes beyond existing ACL obligations. 

This agreement included the introduction of a '60-day policy', where manufacturers automatically offer refunds or replacements if a defect prevents a vehicle from being driveable within 60 days of purchase.

In January 2019, Toyota – which is the market leader in new car sales – also adopted this 60-day refund policy. 

CHOICE urges car companies to act

CHOICE calls for the 60-day refund policy to be adopted by all car companies in Australia. 

"When you buy a new car and it's defective, you should be offered a refund. It's as simple as that," says CHOICE campaigner Amy Pereira. 

"The 60-day refund policy will leave no room for interpretation, making it easier to get a refund for your lemon car." 

We care about accuracy. See something that's not quite right in this article? Let us know or read more about fact-checking at CHOICE.

Stock images: Getty, unless otherwise stated.