Cutting consumer cost of cancelling car contracts

WA Department of Mines, Industry Regulation and Safety
  • Maximum damages claim for cancellations reduced from 15 to five per cent
  • Dealers warned to only charge for realistic costs of contract cancellation
  • Consumers urged to be sure of purchase as cancellation can be costly
  • The maximum amount motor vehicle dealers in WA can charge a consumer who cancels a purchase contract will be reduced to five per cent of the contract’s value from 1 January 2022.

    Under current regulations, sellers can charge up to 15 per cent as “pre-estimated liquidated damages”. However, some dealers have been using the maximum figure as a default, rather than a true reflection of actual costs incurred by the dealership.

    Commissioner for Consumer Protection Gary Newcombe said the practice of automatically charging consumers the maximum amount as liquidated damages prompted a reduction in the rate.

    “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,” Mr Newcombe 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.

    “If we get a complaint on this issue, we will be querying 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.

    “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.

    “Buyers are reminded that there is no cooling off period in WA for motor vehicle sales. Changing your mind and cancelling a motor vehicle contract can be expensive as the dealer is entitled to claim damages, so be certain of the purchase and don’t be pressured into signing the contract.”

    Information about buying a car is available on the Consumer Protection website

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