From 1 October 2015, all used car sales from motor dealer to consumer will be covered by the Consumer Rights Act 2015.
The new Act replaces the trader to consumer parts of all the following: Sale of Goods Act 1979, Supply of Goods (Implied Terms) Act 1973, Supply of Goods and Services Act 1982, Sale and Supply of Goods Act 1994, Sale and Supply of Goods to Consumers Regulations 2002, Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999.
So, as you can see it’s a major new piece of legislation which aims to consolidate various pieces of consumer law from the last 40 years but, what does it mean for you as a car dealer?
Well it hasn’t changed consumer law completely but it has introduced some new concepts such as the ‘Short Term Right to Reject’ and it has attempted to clarify issues over repairs. The headlines do not necessarily make good reading for the UK retail motor industry, but it’s not all gloom and doom and the next few sections will take you through the basics of the Act to enable you to get a good understanding of what it means for second hand car dealers.
Who is a consumer?
According to the Act, a consumer is “someone acting for purposes which are wholly or mainly outside that individuals trade, business or profession”.
So, for example, a plumber who buys a van for his tools but who drives the kids around at the weekend in the van is unlikely to be a consumer and neither is a driving instructor who mainly uses the vehicle to teach learner drivers. The plumber and the driving instructor will not be entitled to the remedies in this Act. Their rights as a business buyer are covered in the remaining parts of the Sale of Goods Act 1979.
What is a fault?
For the purposes of the Act, a fault is something which renders the vehicle:
• Not of satisfactory quality
• Not fit for particular purpose or
• Not as described
We have already seen consumer organisations advise customers that they can return an item for any fault. This is not correct.
A wear and tear item or a minor fault such as a spark plug failure will not give the customer the Rights as set out in the Act. Your first consideration when a customer comes back to you asking for a repair or a refund under the Act should be ‘is this a fault which means the vehicle is not of satisfactory quality, not fit for purpose or not as described?’. Of course, your customer may have a different opinion to you but ultimately the law considers what a reasonable person would think about the fault considering factors such as the age, mileage and price paid for vehicle.
Short Term Right to Reject
This is new and is designed to allow consumers to return goods for a full refund if a fault appears in the first 30 days of ownership. The customer does not have to give you an opportunity to repair in this first 30 days.
However, if the customer wants to exercise this Right they must:
1. Prove there is a fault
2. Prove that the fault was present at the point of sale
If you have undertaken comprehensive pre delivery checks and have kept good records of those checks, you will have made it very difficult for the consumer to prove the fault (hyperlink) was there at the point of sale.
It is obviously up to you how much time you want to put into your pre-delivery procedures but we would recommend you:
• Put a new MOT on each vehicle you sell
• Complete a Pre-Delivery Checklist
• Get the customer to sign to say there were no apparent faults during the test drive
• Have the vehicle checked and/or serviced by an independent garage
• Take photos or even a video of the vehicle
Right to Repair or Replacement – First Tier remedies
Once the 30 day Short Term Right to Reject period has passed, if the customer comes back to you with a fault, they must give you an opportunity to repair or replace the goods before they can seek to reject the vehicle for a refund.
Previously, under the Sale of Goods Act 1979, dealers could undertake several repairs before agreeing to a refund. However, this new Act now only gives you one chance to repair.
To us, this makes the Act not fit for purpose as we all know that modern vehicles can be quite complex and so it is not always possible to correctly diagnose a fault at the first attempt, especially with intermittent faults. This then appears to put dealers at a disadvantage but there is nothing in the Act to prevent you from releasing a vehicle, as long as it is safe to do so, back to a customer and advising them that the repair job card remains open should they experience further problems.
It is also possible to agree with a customer to undertake a repair under any warranty you may have sold with the car as that will constitute a contractual repair and so will not count as a statutory repair under the Act. In this instance, you will need to ensure you have the customer’s agreement to conduct any repairs under warranty (preferably in writing) so it is clear it is a contractual warranty repair and not a statutory repair – the difference being only a statutory repair will give rise to the Final Right to Reject.
Whilst any warranty can be used, if you provide your own warranty you will have more flexibility to authorise repairs and make goodwill gestures.
Final Right to Reject or Price Reduction – Second Tier remedies
From day 31 i.e. on expiry of the Short Term Right to Reject period, the customer no longer has the right to reject the vehicle without giving you an opportunity to make a repair or provide a replacement.
However, if you have already made a statutory repair (as opposed to a contractual repair) then the customer does have the choice of rejecting the vehicle for a refund under the Final Right to Reject. In this instance, you can reduce the amount of the refund to take account of the use the consumer has had of the vehicle. There is no set formula for this deduction and so the figure will need to be calculated depending on many factors such as time of ownership, mileage covered, condition of the vehicle on return etc.
Ultimately if there is a disagreement between you and the consumer as to the amount of the deduction, it will up to the courts to decide.