Lemon Laws in Australia: Faulty Car Refund or Replacement by State (2026)

Is there a lemon law in Australia?

Not as a single Act. The Competition and Consumer Act 2010 (current compilation, 16 September 2026) has no consumer guarantee or remedy rules specific to cars. “Lemon laws” in Australia means two layers of law:

1. The Australian Consumer Law (ACL). Federal law that applies in every state and territory. It gives guarantees for new and used cars bought from a business, and a refund or replacement for a major failure.
2. A state or territory dealer warranty. All eight make dealers repair defects in qualifying cars for a set period after sale. These warranties are in addition to the ACL; they never replace or cut it down.

Your rights under the Australian Consumer Law

Who is covered

You are a “consumer” under ACL s 3 if any one of these applies:

• the price did not exceed $100,000 (set by regulation 77A of the Competition and Consumer Regulations 2010 for goods bought on or after 1 July 2021);
• the car is of a kind ordinarily bought for personal, domestic or household use, so a family car priced above $100,000 is still covered; or
• it is a vehicle or trailer bought mainly to carry goods on public roads.

You are not a consumer if you bought the car to resell it, and you are presumed to be one unless the dealer proves otherwise. Used cars are covered as well as new ones.

Acceptable quality: the guarantee that matters most

A car supplied by a business must be of acceptable quality (s 54): fit for the purposes cars are commonly used for, acceptable in appearance and finish, free from defects, safe and durable, as a reasonable consumer who knew its full condition, including hidden defects, would regard as acceptable, taking into account its price and what the dealer said. An older, cheaper car is not judged like a new one, but must still be safe and reasonably durable.

The guarantee does not cover a problem the dealer specifically pointed out before you agreed to buy, one that an inspection you carried out ought reasonably to have revealed, or damage you caused through abnormal use. Separate guarantees cover a purpose you told the dealer about and the car’s description (ss 55-56).

Minor failure or major failure

• Minor failure (can be fixed): you can require the dealer to fix it within a reasonable time, and the dealer chooses whether to repair, replace or refund (s 261). If it refuses or takes too long, you can have it fixed elsewhere and recover the reasonable cost, or reject the car (s 259(2)).
• Major failure: you can reject the car, or keep it and claim compensation for its drop in value (s 259(3)).

Under s 260(1) a failure is major if a reasonable consumer who fully knew about it would not have bought the car; the car departs significantly from its description or demonstration model; it is substantially unfit for its normal purpose, or a purpose you told the dealer about, and cannot be fixed easily and within a reasonable time; or it is unsafe.

Several minor faults can add up to a major failure

For contracts made on or after 18 December 2020, two or more failures can together be a major failure if a reasonable consumer who knew about all of them, taken as a whole, would not have bought the car (s 260(2)). They need not relate to the same guarantee, and it applies even if some were already repaired (s 260(3)).

The ACCC’s motor vehicle guide gives examples of major failures: a new car off the road for a combined five weeks of repair attempts; an engine seizure not repaired within five weeks; and a two-year-old car that could not engage reverse after two months of repair attempts. Its counter-example is three easily repaired, unrelated minor faults over three years.

Refund or replacement: your choice, not the dealer’s

Once you reject the car for a major failure, the dealer must give you, as you elect, a refund or a replacement of the same type and similar value if one is reasonably available (s 263(4)). A refund is the money you paid plus the value of anything else you gave, such as a trade-in, and the dealer cannot pay it as a credit towards another of its cars (s 263(5)). The ACCC’s guidance is that a refund for a major problem should be the full amount paid, with no deduction for use.

Rejecting the car passes ownership back to the dealer. If the car cannot be returned or moved without significant cost to you because of the fault, the dealer must collect it at its own expense within a reasonable time (s 263(3)).

How long you have to reject the car

There is no fixed number of days or kilometres. The rejection period in s 262 is the time within which it would be reasonable to expect the fault to show, having regard to the type of car, its likely use, how long it should last and how much use it should take. The ACCC’s guide says nothing ties this period to a warranty, so a warranty can end before the rejection period does. You lose the right to reject once that period ends, if you have disposed of the car, or if it was damaged after delivery for reasons unrelated to its condition when sold.

Compensation and “sold as is”

On top of a refund, replacement or repair, you can claim damages for other reasonably foreseeable loss caused by the failure (s 259(4)), which depending on the facts can include costs such as towing or an inspection.

A contract term that tries to exclude or limit the guarantees or remedies is void (ss 64 and 276). A dealer can sell a car with a known problem only by specifically drawing that problem to your attention before you buy, or disclosing it on a transparent written notice on the car (s 54(4)-(5)). Calling a car “as is” does not remove the guarantees, and the ACCC says a “no refunds” sign does not take guarantee rights away.

The dealer cannot send you to the manufacturer

Your claim is against the business that sold you the car. The ACCC says the dealer must assist and must not tell you to go to the manufacturer for a remedy. The manufacturer must reimburse the dealer’s costs of meeting the acceptable quality guarantee (s 274). A manufacturer’s warranty is extra: it cannot reduce your ACL rights, the guarantees can continue after it expires, and servicing at an independent repairer does not affect them. Separately, you (or a later owner) can claim damages from the manufacturer, but not a refund or replacement, within 3 years of when you first became aware, or ought reasonably to have become aware, of the failure (ss 271-273).

If the car is on finance

• Joint liability (ACL s 278). If the dealer arranged the loan with a “linked credit provider” (a lender it works with by arrangement), the lender and dealer are jointly liable for loss from a failure of the guarantees in ss 54-57, with the lender’s share capped at the amount financed plus interest and costs (s 281).
• Ending the loan (National Credit Code s 135). For a personal car loan, if the sale contract is rescinded or discharged, for example by a lawful rejection, you can end a tied loan from a linked credit provider and recover interest and other amounts paid under it, unless you found the loan yourself without prompting.
• Hardship (NCC s 72). You can give the lender a hardship notice, orally or in writing; a refusal must give reasons and the details of the Australian Financial Complaints Authority.

What the law does not do yet

As at 19 October 2026 there is no penalty for a dealer simply refusing a consumer guarantee remedy (the ACCC noted this in its December 2025 report on second-hand cars); penalties have been announced but not legislated. Misleading you about your rights is different and already carries civil penalties (s 29(1)(m)): in February 2024 the Federal Court ordered Mazda Australia to pay $11.5 million for misleading nine consumers about their consumer guarantee rights after repeated failed repairs. A ban on unfair trading practices applies from 1 July 2027.

Dealer warranties in each state and territory

Each dealer warranty (also called a dealer guarantee or duty to repair) makes the dealer fix covered defects at its own cost. Each state page has the full rules, exclusions and fees.

Repairs generally need only bring the car to a reasonable condition for its age. Usual exclusions are accident damage or misuse after the sale and, in most states, tyres and batteries. In most states a known defect is excluded only if listed on a signed defects notice before the sale, and a clause that tries to remove the warranty is void.

New car lemon laws in Australia

The ACL protects new cars everywhere, and no manufacturer’s warranty can take that away. Some places add more:

• NSW and the ACT: a dealer warranty for new cars. For a car driven less than 15,000 km at sale, it runs to 20,000 km after manufacture and 12 months less 1 month per 2,000 km driven before sale, and passes to later owners. NCAT has no money limit for a new car used substantially for private purposes.
• Northern Territory: the dealer must repair defects in a new or demonstrator vehicle that appear while the manufacturer’s warranty runs, or within 3 months or 5,000 km if there is none.
• Tasmania: the warranty covers qualifying new cars, but the dealer must repair only where no manufacturer’s warranty covers the defect or the manufacturer refused.
• Western Australia: the Act implies a condition that a new car sold by a dealer is of merchantable quality.
• Queensland, Victoria and South Australia: no state warranty for new cars; the ACL applies.

Which state’s law applies to you

The dealer’s state decides. The dealer warranty, the regulator and the tribunal or court are those of the state or territory where the dealer you bought from is located, not where you live. That holds if you travelled interstate, bought online or had the car delivered. Some regulators also help their own residents with an interstate business (Access Canberra does), so ask your home regulator too. Victoria’s Guarantee Fund, for example, does not pay claims about cars bought from interstate traders. The ACL applies wherever you are.

The interstate exception. If the dealer is an individual or sole trader (not a company) and you live in a different state, the tribunals in NSW and Victoria (NCAT and VCAT) cannot decide the dispute (Burns v Corbett [2018] HCA 15). The claim goes to that state’s court instead. Claims against companies are not affected, and neither are buyers who live in a territory. Queensland’s QCAT currently hears these disputes, because the Queensland Court of Appeal has held it is a court (Owen v Menzies [2012] QCA 170), although two appeals challenging that are pending. So for a Queensland dealer, interstate buyers use QCAT. In Western Australia, South Australia and Tasmania the forum is already a court.

Who to complain to: the regulator in the dealer’s state

Regulator help is free conciliation, not a judgment: several regulators, including NSW Fair Trading and Queensland’s Office of Fair Trading, say they cannot force a business to pay or refund. Most expect you to have written to the dealer first. Dealer compensation funds of last resort exist in NSW, Victoria, Queensland (not for warranty failures), South Australia and the ACT.

The 5 steps to a refund or replacement

1. Contact the dealer. Phone and email, describe the fault and what you want, and give them 24 hours to respond. Keep a record. Watch the deadlines in the table: Queensland needs a written defect notice before the warranty ends, Tasmania needs your claim within 7 days of finding the defect, and South Australia needs notice within the warranty period.
2. Send a formal demand. If the dealer does not respond or refuses, send a formal demand under the ACL and the dealer’s state law.
3. Complain to the regulator in the dealer’s state. Attach a copy of your letter to show you tried, and ask for the complaint reference number.
4. Send a final demand. Quote your first letter, the dealer’s response and the regulator’s reference number.
5. Lodge with the tribunal or court in the dealer’s state and ask for the refund, replacement or compensation you want.

Start with the dealer’s state

Lemon laws in your state

Pick the state or territory where the dealer is located.

Private sales and auctions

Most consumer guarantees apply only to sales “in trade or commerce”, so a one-off private sale carries only the guarantees of clear title, undisturbed possession and no undisclosed debts, and no state dealer warranty. At an auction run by an agent for the owner, the ACL quality guarantees do not apply, and in most states neither does the dealer warranty (in Queensland it still applies at auction when the car is owned by a licensed dealer or auctioneer, but not when the auction is for a private owner). The ACCC’s guide says an eBay-style online listing is not a “sale by auction” for this purpose.

Bought from a private seller?

Questions people ask

Is there a lemon law in Australia?

No, not as a separate Act. The Australian Consumer Law applies in every state and territory: if a car bought from a dealer has a major failure, you can reject it and choose a refund or a replacement. Each state and territory adds a dealer warranty on top, and the dealer’s state decides which one applies.

Can you return a used car if it has problems in Australia?

Yes, if you bought it from a dealer and the problem is a major failure: you can reject it within a reasonable time and choose a refund or a replacement. For a minor failure the dealer can choose to repair it first. What counts as acceptable quality depends on the car’s age, price and kilometres.

Can I get a refund on a used car?

Yes, when the fault is a major failure and you reject the car within the rejection period. The refund covers the money you paid plus the value of any trade-in, and the dealer cannot make you take a credit instead. For a minor fault, the dealer can choose to repair it instead.

Does Australian Consumer Law apply to second-hand cars?

Yes, when you buy from a dealer or other business. The law treats second-hand goods as goods, so the acceptable quality guarantee applies, judged against the car’s age, price, kilometres and condition. Most guarantees do not apply to private sales or to auctions run by an agent, though clear title, undisturbed possession and no hidden debts still do.

What is considered a major failure for a car?

A fault is a major failure if a reasonable buyer who knew about it would not have bought the car, if the car is unsafe, if it differs significantly from its description, or if it is substantially unfit for normal use and cannot be fixed easily and within a reasonable time. For contracts from 18 December 2020, several minor faults together can also be a major failure.

Can I return a car to a dealership in Australia?

Yes. For a major failure you reject the car by telling the dealer, with your reasons, and return it. If it cannot be returned or moved without significant cost to you, the dealer must collect it at its own expense. Ownership then passes back to the dealer, and you choose a refund or a replacement.

Are there new car lemon laws in Australia?

Yes. The Australian Consumer Law covers new cars from a dealer, including a refund or replacement for a major failure, and a manufacturer’s warranty cannot take that away. Some places add more: NSW and the ACT have a statutory dealer warranty for new cars, the NT covers new and demonstrator cars, Tasmania’s warranty can cover new cars, and WA implies merchantable quality.

How long do I have to reject a faulty car?

There is no fixed number of days or kilometres. The law allows a reasonable time, judged by the type of car, its likely use, how long it should last and how much use it should take before such a fault shows. The ACCC says this period can run past the end of a warranty, so an expired warranty does not end your rights.

Can the dealer refuse a refund and only offer repairs?

Only for a minor failure. Then the dealer may choose to repair, replace or refund, but if it refuses or takes too long you can have the car fixed elsewhere and recover the reasonable cost, or reject it. For a major failure the choice between a refund and a replacement is yours, and the dealer cannot insist on a repair or send you to the manufacturer.

I bought from a dealer in another state. Which law applies?

The dealer’s state decides the dealer warranty, the regulator and the tribunal or court, not the state you live in. The Australian Consumer Law applies in both. One exception: if the dealer is an individual or sole trader rather than a company and you live in a different state, the NSW and Victorian tribunals cannot decide the claim, and it goes to that state’s court. Queensland’s QCAT currently hears these claims.

What if the car was on finance?

If the dealer arranged the loan through a lender it works with, that lender can be jointly liable with the dealer for a guarantee failure, up to the amount financed plus interest and costs. If you lawfully reject the car, you can generally end that tied loan. Tell both in writing, and keep paying while a minor fault is repaired.

What to do if a business won’t give you a refund?

Send a formal demand that relies on the Australian Consumer Law and the dealer warranty law in the dealer’s state. If that fails, complain to the consumer regulator in the dealer’s state, then send a final demand. If the dealer still refuses, apply to the tribunal or court in the dealer’s state, which can make binding orders such as payment of money or repairs.

Official sources

All checked 19 October 2026 by the Claim Done content team.

• Competition and Consumer Act 2010, Schedule 2 (Australian Consumer Law)
• Competition and Consumer Regulations 2010 (reg 77A)
• National Credit Code
• Competition and Consumer Amendment (Unfair Trading Practices) Act 2026
• ACCC: New and second-hand cars
• ACCC: Motor vehicle sales and repairs guide
• ACCC: Repair, replace, refund, cancel
• ACCC: Consumer rights and guarantees
• ACCC: Consumer issues in the sale of second-hand cars (December 2025)
• Motor Dealers and Repairers Act 2013 (NSW)
• Motor Car Traders Act 1986 (Vic)
• Motor Dealers and Chattel Auctioneers Act 2014 (Qld)
• Motor Vehicle Dealers Act 1973 (WA)
• Second-hand Vehicle Dealers Act 1995 (SA)
• Motor Vehicle Traders Act 2011 (Tas)
• Sale of Motor Vehicles Act 1977 (ACT)
• Consumer Affairs and Fair Trading Act 1990 (NT)

Claim Done is not a law firm and does not give legal advice. This page is general information.