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The Consumer Rights Act is intended to help protect consumers and ensure fair trading. The new law aims to consolidate existing legislation and introduces some new regulations. According to the Citizens Advice Bureau, the law will:
“Be clearer and easier to understand, meaning that consumers can buy and businesses can sell to them with confidence. On the rare occasions when problems arise, they will be able to sort out disputes more quickly and cheaply.”
Who does it affect?
The Act affects any trader supplying goods or services to consumers, which of course includes the retail motor industry. Sales of vehicles by dealers, along with servicing, repairs and maintenance come under the Act’s remit.
The rights are largely separate to any manufacturer warranty.
When does it come into force?
The Act comes into force on 1 October 2015.
How will it affect my business?
Some principles remain the same and the Act consolidates existing laws. However, there are a few changes.
These stronger consumer rights mean bigger ‘risk’ for dealers, especially as motor vehicles can depreciate rapidly.
What are the changes in detail for the provision of goods?
Under the new law, goods must:
If goods do not meet these requirements, the consumer can:
The dealer must repair or replace the goods:
If the one attempt at repair or replacement fails, the customer can demand a price reduction or completely reject the goods.
If the repair or replacement fails, or there is a delay or inconvenience to the customer, or no remedy is possible from the start, the customer can:
Consumers only have to prove the defect was present on delivery if they find it after 6 months. Otherwise the defect is assumed to have been present, and consumers do not have to prove anything.
Is there any protection for traders?
Traders have some protection. A customer cannot request a full replacement or repair where it would be a ‘disproportionate’ burden on the dealer, for example, requesting a new car because of a faulty door, where the door alone could be replaced or repaired.
Moreover, as mentioned above, if the customer decides to finally and completely reject the goods within the first six months of the contract, the dealer can take into account the consumer’s enjoyment of the use of the goods when giving them a refund.
This deduction for use does not mean deduction in value of the goods. BIS have promised guidance to clarify this deduction, which only applies to the sale of motor vehicles.
Consumers cannot claim under the Act:
What are the changes in detail for the provision of services?
The Act also covers the provision of services. Under the new rules, services must be:
If the trader fails to meet these requirements, the consumer can ask the trader to repeat the service at no further cost. The trader must pay for labour and materials.
As with goods, if there is delay or inconvenience or repeat performance is impossible, the consumer can get a reduction in price– normally the difference in value between the service the consumer paid for and the value of the service provided.
If a trader supplies services without due care and skill, or not in accordance with information provided concerning the service, consumers can ask them to repeat the service. However, if this is impossible, or would be inconvenient or take too long, the consumer can ask to pay less.
Consumers have no right to request a repeat performance where services were not provided within a reasonable time or in accordance with information provided concerning the trader.
Moreover, consumers cannot require a repeat of the service if it would be impossible to complete performance of the service and conform to the contract, as for example with a time specific service.
The reduction in price can be up to 100%. However, the reduction is usually the difference in value between the service the consumer paid for and the service they received. In the case of a failure to provide information concerning the trader, the required discount is less clear.
Any refunds must be given:
Moreover, there is a new absolute ban on excluding liability for:
There is also a ban on limiting liability to below the contract price.
Furthermore, if a vehicle breaks down hundreds of miles from where the initial work was done, but the breakdown is due to a problem with the service, the consumer could be entitled to claim the cost of work carried out by a different trader.
Is there any protection for traders?
Consumers cannot make a claim under the Act:
Customers cannot recover the same loss twice. However, they can claim damages where goods are rejected.
What do I need to do?
Most NFDA members already tend to offer customer care above and beyond existing legal requirements. There are a few steps dealers can take to ensure compliance with the Act and prevent unnecessary problems or losses, if a customer exercises their new legal rights.
Employers should make sure that they and their employees are careful about categorising certain issues, and about how these issues are presented to customers through customer-service.
Employees that deal directly with customers should also be made aware of the new consumer rights detailed above. A dealership’s customer service team should be trained to deal with customers asserting their new rights, to document faults brought to the attention of customers (in order to protect the business from unfair claims), and to keep clear records of how show vehicles are different from the vehicle supplied.
Dealers should consider reviewing their complaints handling procedure and company terms and conditions. They should ensure that point of sale material and literature is accurate regarding pre-contractual information and that consumers are aware of their significant rights. A review of returns policies is also advisable, especially regarding allocating responsibility for the cost of return of any goods to the consumer. In terms of services, liability clauses in services contracts should also be looked at again.
Dealers should also review agreements with sub-contractors and agents to ensure that they are protected. They should consider the impact of the Act on contractual supply agreements and risk.
Moreover, liabilities cannot necessarily be passed on to manufacturers under the commercial terms agreed with that manufacturer. Dealers might be wise to discuss the new Act with their manufacturers to avoid undue exposure to faulty products.
To help clarify the new rules we have included some examples below highlighting situations where the new rules may impact a dealers business.
Gavin decides to buy a used car at an auction. The relevant car is sold ‘as seen’ according to the catalogue. No other information about the car is provided.
The auction is public and is being held at a local auction house; however, Gavin chooses not to attend; instead he views the car online.
When Gavin collects the car, he finds that it has a number of faults (ranging from various large dents and scratches to broken lights, door handles and a damaged sunroof). Gavin demands a refund on the basis that the car is faulty.
As Gavin could have attended the auction to inspect the car beforehand, he is not treated as a consumer and the Act does not apply. The SGA offers limited protection, not least because the catalogue indicated that the car was sold ‘as seen’. Gavin is therefore unlikely to be entitled to a refund, or any other remedy.
Hilary buys a brand new Range Rover Sport. On collection from the dealership, she discovers a blemish on one of the alloy wheels, which she draws to the attention of Peter, the sales manager. The blemish is unlikely, of itself, to render the car ‘unsatisfactory’ even though the car is new and Range Rover is a prestige brand. The analysis could be different, say, if Hilary had discovered a number of scratches on the rear tailgate and a tear in the upholstery.
In any event, Peter apologises to Hilary and offers some refreshment while a technician resolves the minor ‘handover’ issue. Problem solved.
Two weeks after taking delivery of the car, Hilary notices that a warning light has come on indicating that the start-stop function of the vehicle has developed a fault (and has been disabled). She also notices that the engine has begun to misfire intermittently. In such circumstances, there is a stronger argument that the car is unlikely to be of ‘satisfactory quality’ and she returns to the dealership for a solution.
Peter is nevertheless able to convince Hilary to give the dealership an opportunity to resolve the issue. He offers Hilary a courtesy car while the issue is being investigated and rectified. Hilary collects her car the following week and no more problems arise.
Daksh buys used Mercedes Benz E-class estate for £15,000. The car is four years old and has covered 40,000 miles. The dealer offers to sell Daksh a six month warranty with the car, but Daksh declines the option.
Daksh covers 3,000 miles in the car over the next six months, following which it breaks down. A subsequent inspection reveals serious problems with a faulty water pump and oil leaks. The cost of the repairs will be £2,500.
It is unlikely that these faults will render the car of unsatisfactory quality. The car is now four and a half years old and has covered over 43,000 miles. Some degree of wear and tear must be expected and Daksh must expect that defects, even serious defects, will develop sooner or later.
Ken visits a BMW dealership to buy a second-hand X3. Before agreeing the deal, he explains to Ray, the sales manager, that he wants something sporty but something that he can also use for some off-road events. Ray advises Ken that although the X3 has four wheel drive, it is not suitable for serious or extreme off-road use. Ken ignores this advice and buys the car. Ray makes a note of his advice.
Two months later, Ken tries to return the car after getting stranded fording a river at an off-road driving day when the engine became flooded. Ken complains that it is reasonable to expect a 4×4 to handle this terrain without breaking down.
In the extreme circumstances however, and given Ray’s warning, it is unlikely that Ken would be able to argue successfully that the car was not ‘fit for purpose’.
Sue visits a dealership to buy a new Golf GTI. The display model in the showroom features, amongst other things, a traditional handbrake. Sue really likes this model and says to Trevor, the salesman, that she wants one just like it. On delivery, Sue notices that the model delivered comes with an electronic parking brake instead.
Sue queries the discrepancy with Trevor, who informs her that all Golfs are now supplied with this standard feature. This change was not brought to Sue’s attention when she agreed the original deal. The car does not conform to the contract because it does match the ‘model seen or examined’, and the change was not drawn to Sue’s attention pre-contract.
Despite Sue’s rights, Trevor is nonetheless able to explain to Sue’s satisfaction the benefits of the new technology, and offers a free-service as a goodwill gesture, which leads to Sue accepting the car.
For further information please contact the NFDA on 01788 538303 or email firstname.lastname@example.org