Consumer Protection has urged people buying cars to be sure of their purchase as cancellation of a contract can be costly.
Commissioner for Consumer Protection, Gary Newcombe said the maximum amount motor vehicle dealers in the State could charge a consumer who cancelled a purchase contract would be reduced to five per cent of the contract’s value from 1 January 2022.
“However, under current regulations, sellers can charge up to 15 per cent as ‘pre-estimated liquidated damages’,” Mr Newcombe said.
“Some dealers have been using the maximum figure as a default, rather than a true reflection of actual costs incurred by the dealership,” he said.
“This practice of automatically charging consumers the maximum amount as liquidated damages has prompted a reduction in the rate.”
Mr Newcombe said even with the rate falling to five per cent, dealers should not treat this as a ‘flat rate’.
“Dealers must only charge an amount that will recoup the reasonably estimated and realistic costs of the cancellation,” he said.
“For example, it can be assumed that during times of high demand for new and used vehicles, such as now, the cost of cancellation to sellers is going to be relatively low, especially given the vehicle will be sold fairly quickly to another customer.”
The Commissioner said if Consumer Protection got a complaint on the issue, it would query the amount of ‘damages’ charged following cancellation.
“So dealers will need to demonstrate how the charge has been calculated and how the cancellation has left them out of pocket, otherwise they will be in breach of the law,” he said.
“Consumers who are not satisfied with the damages being charged by a dealer can lodge a complaint with Consumer Protection and we can conduct an independent assessment in an attempt to resolve the matter,” Mr Newcombe said.
