You’d agreed the car price. Then the “business manager” took over and by the time you signed, the finance contract was $4,800 higher: a $2,200 “extended warranty”, $900 of “tyre and rim insurance”, $700 of “paint and fabric protection”, and $1,000 of “loan protection”. You were told the warranty was “required for finance”, the paint protection was “already applied”, and the whole thing was so fast you didn’t read it. Now you’ve found out the warranty covers almost nothing and the ACL already gave you most of it for free.
Add-on products at the dealership have been the subject of a Royal Commission, ASIC enforcement, and industry-wide refund programs. You have more leverage here than almost anywhere else in consumer law.
Your rights
- Add-on insurance: deferred sales model. Since October 2021, add-on insurance (tyre and rim, GAP, loan protection, mechanical breakdown insurance) can’t be sold at the same time as the car or the loan. There must be a 4-day pause after you commit to the main purchase before the insurance can be offered, and you can’t be pressured during it. A policy sold at the finance desk on the day is very likely a breach of the Australian Securities and Investments Commission Act and the Corporations Act 2001 rules ASIC enforces.
- Cooling-off and cancellation. Add-on insurance policies generally carry a cooling-off period (usually 14 days or more) and can be cancelled at any time for a pro-rata refund of the unexpired premium. The dealer or insurer can’t refuse the pro-rata refund.
- Extended warranties and the ACL. The consumer guarantees (ss 54–59 ACL) already cover a new or used car for a reasonable period regardless of any dealer warranty. Telling you an extended warranty is “needed” for protection you already have by law, or “required for finance”, is a false representation about the existence or effect of a guarantee (s 29(1)(m)) and misleading conduct (s 18).
- Unfair contract terms (ss 23–28 ACL) in warranty products that exclude nearly everything, require servicing only at the dealer, or are non-refundable.
- Financial product complaints go to AFCA. Insurers and many warranty providers are AFS licensees. AFCA is free and binding on them. ASIC oversees the whole area and ran a program that saw insurers refund over $130 million to customers of mis-sold add-on products.
What to do right now
- Get every document. The contract of sale, the finance contract, each add-on policy or warranty certificate, and the itemised breakdown showing what each product cost. If it’s all rolled into the loan, ask the financier for the itemisation.
- Identify each product’s provider. The insurer (for tyre and rim, GAP, loan protection), the warranty administrator, and the dealer. Each has a separate complaints process and you write to all of them.
- Cancel the insurance products in writing today. “I cancel policy [number] effective immediately and require a refund of the unexpired premium. Further, this product was sold in breach of the deferred sales model / was misrepresented as required. I require a full refund.” Send to the insurer and copy the dealer.
- Challenge the warranty. Write to the warranty provider and the dealer: the warranty was represented as necessary for protection already provided by the ACL (s 29(1)(m)); you require a full refund.
- Send a Letter of Demand. A formal letter to the dealer (copied to the providers) citing the ACL provisions, the deferred sales rules, the misrepresentations made, the itemised refund sought, and a 14-day deadline before AFCA, ASIC and fair trading. Dealers settle these because ASIC’s interest in add-on sales is not something they want revived over your $4,800.
- Escalate to AFCA for the insurance and warranty products, and to fair trading and the tribunal for the dealer’s conduct.
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The products, one by one
- Extended / mechanical breakdown warranty. Often duplicates ACL rights and the manufacturer’s warranty. Refundable if misrepresented; frequently refundable pro-rata anyway.
- Tyre and rim insurance. Low claims, high commissions. Deferred sales rules apply. Cancel for a pro-rata refund; full refund if sold on the day.
- GAP insurance. Covers the loan-to-value gap if the car is written off. Sometimes genuinely useful; still subject to deferred sales rules and cooling-off.
- Loan protection / consumer credit insurance. The most heavily criticised product of the Royal Commission. Major insurers refunded en masse. Cancel and demand a full refund if sold without a proper needs assessment.
- Paint, fabric and rust protection. Not insurance; a product and a service. If it wasn’t applied, or was represented as necessary, s 18 and the consumer guarantees apply. Ask for proof of application.
Who to complain to
AFCA for any insurance or warranty product from an AFS licensee. ASIC to report the sales conduct (report online). Your state fair trading body for the dealer’s misrepresentations. The ACCC for warranty products that misstate ACL rights. Your state civil tribunal for the dealer refund.
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What happens when you send a Letter of Demand
Same problem. What a prepared case looks like.