Lemon Laws New South Wales: Faulty Car Refund or Replacement (2026)

Prepared by the Claim Done content team from the legislation and official pages listed under Sources, checked 19 October 2026. Claim Done is not a law firm and does not give legal advice; this page is general information.

Your rights in 60 seconds

• The Australian Consumer Law (ACL) covers every car a dealer sells you, new or used. It applies in every state, and no state warranty or contract term displaces it.
• Major failure: you can reject the car and choose a refund or a replacement. The choice is yours, not the dealer’s (ACL ss 259(3), 263(4)).
• Minor failure: the dealer chooses to repair, replace or refund, within a reasonable time (ss 259(2), 261).
• NSW dealer guarantee: used cars driven not more than 160,000 km and not more than 10 years old when sold must be repaired at the dealer’s cost for 3 months or 5,000 km, whichever comes first (Motor Dealers and Repairers Act 2013 (NSW) s 69(5)). Days the dealer has the car do not count.
• “Sold as is” changes nothing: the ACL guarantees cannot be excluded (ACL s 64), and neither can the dealer guarantee (MDRA s 180).
• NCAT decides disputes: up to $100,000, with no limit for a new private-use car. A $5,000 claim costs an individual $64 to lodge.

Which state’s law applies to you

What matters is where the dealer you bought from is located, not where you live. The dealer’s state decides the state dealer warranty, the regulator that takes your complaint and the tribunal or court that hears your claim. The ACL applies either way.

So if you live in Queensland or the ACT and bought from a dealer in Sydney, Newcastle or Albury, this NSW page applies. If you live in NSW but bought from a Canberra dealer, read our ACT page; from a Victorian or Queensland dealer, read Victoria or Queensland. Online and interstate purchases work the same way: check the dealer’s address on the contract or tax invoice.

The interstate exception: dealers who are individuals

If the dealer is an individual or sole trader (not a company ending in “Pty Ltd” or “Ltd”) and you live in a different Australian state, NCAT cannot decide the dispute because of the High Court’s decision in Burns v Corbett [2018] HCA 15, and the claim goes to a New South Wales court instead. It does not apply if the dealer is a company, or if you live in the ACT or the Northern Territory. Check the seller’s name on your contract before you lodge anything.

Your rights under the Australian Consumer Law

The consumer guarantees are in Schedule 2 to the Competition and Consumer Act 2010 (Cth). “Goods” expressly include vehicles and second-hand goods (s 2). You are a consumer if the price was not more than $100,000, or the car is the kind normally bought for personal or household use, which covers a dearer family car (s 3(1); Competition and Consumer Regulations 2010 reg 77A).

Acceptable quality and the other guarantees

A car must be as fit for its normal purposes, acceptable in appearance and finish, free from defects, safe and durable as a reasonable consumer, fully aware of its condition including hidden defects, would regard as acceptable, taking into account its nature, price, anything the dealer or manufacturer said about it and the other circumstances (s 54). A ten-year-old car is not judged like a new one, but it must still be safe and reasonably durable for its age, price and kilometres. The car must also be fit for any purpose you told the dealer about, such as towing a particular caravan (s 55), and match its description: model, engine, year and kilometres (s 56).

The guarantee does not cover faults specifically pointed out to you before you agreed to buy, including on a transparent written notice displayed with the car (s 54(4)-(5)), faults your own inspection ought reasonably to have revealed (s 54(7)), or damage from your abnormal use (s 54(6)).

What is a major failure (s 260)

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

Several minor failures can add up to a major one. For contracts made on or after 18 December 2020, two or more failures are a major failure if a reasonable consumer who knew about them all, taken as a whole, would not have bought the car (s 260(2)). The ACCC’s motor vehicle guide gives examples it treats as major: 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 repairs. That is regulator guidance, not law.

Refund or replacement: your choice

For a major failure you notify the dealer that you reject the car and why (s 259(3)). The dealer must then, as you elect, refund the money you paid plus the value of any trade-in, or replace the car with one of the same type and similar value if reasonably available (s 263(4)). A credit note does not count as a refund (s 263(5)). The ACCC says a refund for a major problem should be the full amount, with no deduction for use; the Act itself says “any money paid”. If the car cannot be returned without significant cost to you, the dealer must collect it at its own expense within a reasonable time (s 263(3)). You can also recover reasonably foreseeable losses, such as towing or an inspection report (s 259(4)).

How long you have to reject (s 262)

There is no fixed number of days. You can reject within the time it would be reasonable to expect the failure to show up, considering the type of car, how it is likely to be used, and how long and how much it should be used before such a failure appears. The ACCC’s guide notes the warranty period can end before this rejection period does. You lose the right if you sell the car, or it is damaged after delivery for an unrelated reason. Act promptly and put everything in writing.

“Sold as is”, the manufacturer and finance

• “As is” does not work. Terms that exclude or limit the guarantees are void (s 64). Calling a car “as is” does not remove the guarantees: only defects specifically drawn to your attention before you agreed to buy are excluded (s 54(4)-(5)).
• The dealer cannot send you to the manufacturer. 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 274). A claim against the manufacturer gives damages only, not a refund (ss 271-272), within 3 years of when you first became aware, or ought reasonably to have become aware, of the failure (s 273).
• Dealer-arranged finance. A linked lender is jointly liable with the dealer for your loss from a failure of the acceptable quality, purpose or description guarantees (s 278), capped at the amount financed plus interest and costs (s 281). If the sale contract is rescinded or discharged, for example because you rejected the car, you can usually end a tied personal loan from the dealer’s linked lender by written notice and recover the interest you paid (National Credit Code ss 135, 137), unless you found the lender yourself. Tell both the dealer and the lender, and keep paying while a minor fault is repaired. If repayments are a struggle, give the lender a hardship notice orally or in writing (NCC s 72).
• Misleading you is penalised. No penalty applies yet for simply refusing a remedy (reforms are announced, not law). But telling you that you have no rights, for example because a warranty expired, can breach ACL s 29(1)(m). In February 2024 the Federal Court ordered Mazda to pay $11.5 million in penalties for misleading customers about their consumer guarantee rights.

The NSW dealer guarantee (statutory warranty)

The guarantee is in Part 4 Division 4 (ss 67-77) of the Motor Dealers and Repairers Act 2013 (NSW) (MDRA) and the Motor Dealers and Repairers Regulation 2025, which replaced the 2014 Regulation on 1 September 2025. A dealer must, at its own expense, repair or make good a defective vehicle to a reasonable condition having regard to its age (s 68(1)). A “defective vehicle” is one whose condition would breach an ACL guarantee in ss 54-57, including fitted accessories (s 67). It binds any business dealing in motor vehicles (s 5), whether or not licensed.

Borderline cars: NSW Fair Trading’s pages say “less than” 160,000 km and 10 years; the Act says “not more than”, so a car exactly on either line is covered. A dealer must also state a known guarantee defect in its advertisement (Reg 2025 s 21), so keep the listing.

Other vehicles: used motorcycles up to 30,000 km and 5 years old get 3 months or 3,000 km (s 69(9)); new motorcycles driven under 7,000 km at sale, 10,000 km after manufacture or 6 months less 1 month per 2,000 km driven before sale (s 69(6)); over 7,000 km, 3 months or 3,000 km (s 69(7)); since 1 September 2026, new trailers and caravans 6 months and second-hand ones up to 10 years old 3 months (Reg s 66). Dealings in heavy vehicles under the Heavy Vehicle National Law are outside the Act (Reg s 53(4)(a)).

Cooling-off in NSW

NSW has no general cooling-off for cars. It applies only when the dealer provides credit or arranges it through a linked lender (MDRA s 78), and not to auction sales or business vehicles. It ends at 5pm on the next day the dealer is open, or 5pm the next day for an online purchase (s 80). Cancel by signed written notice, even after delivery (s 81). You pay the dealer $250 or 2% of the price, whichever is less (s 85). You can sign a waiver form (s 82). For a fault found later, use the ACL and the dealer guarantee.

Compensation fund: Motor Dealers and Repairers Compensation Fund

A last resort for buyers left out of pocket (MDRA ss 164-172).

• Covers loss because a dealer breached the Act, including the dealer guarantee, plus incompetent licensed repairs, failure to give clear title and unreturned deposits (ss 164, 168(1)).
• Excludes personal injury, other property, later improvements, unregistrable or racing vehicles, s 72 vehicles and the cost of claiming (s 168(2); Reg s 60).
• Conditions: the dealer was licensed or you reasonably believed so (s 170(3)), and you took all reasonable steps to use your legal remedies, which may include a tribunal order and trying to enforce it (s 170(4)).
• Time: within 18 months of the loss or becoming aware of it, or 12 months after an unpaid judgment obtained in that time (s 169(3)).
• Maximum: $100,000 (Reg s 61). Apply in writing via the compensation fund page; reconsideration within 12 months (s 172).

New cars in NSW

New cars get the ACL plus a NSW guarantee: driven under 15,000 km at sale, 20,000 km after manufacture and 12 months less 1 month per 2,000 km driven (s 69(3)); driven 15,000 km or more, 3 months or 5,000 km (s 69(4)). It passes to later owners (s 68(2)), but ends if a dealer later acquires the car (s 68(3)). NCAT has no money limit for a new car used substantially for private purposes (Fair Trading Act 1987 (NSW) s 79S(6)(a)). A manufacturer’s warranty adds to your rights but cannot take them away, and the ACCC says servicing at an independent repairer does not affect them. Check vehiclerecalls.gov.au for recalls, which do not replace your rights against the dealer.

Private sales and auctions

The dealer guarantee binds dealers only. NSW Fair Trading says a private sale is not covered by the MDRA or the ACL, and NCAT motor vehicle claims cannot be brought against a private person. The ACCC says the guarantees of clear title, undisturbed possession and no hidden debts still apply. The ACL quality guarantees do not apply to an agent-run sale by auction (ACL ss 54-59), though the ACCC says eBay listings are not auctions in that sense. A NSW dealer’s auction sale loses the dealer guarantee only if a notice saying so was attached (s 72(a)).

Bought privately? See private sale rights in New South Wales

Evidence checklist

1. Contract and tax invoice showing the dealer’s legal name, address, licence number and price.
2. The advertisement (screenshot it now) and any dealer’s notice, defect notice or inspection report.
3. Odometer readings at purchase and now, and your finance contract.
4. A dated list of each fault, with the kilometres when it appeared.
5. An independent mechanic’s report or quote.
6. Every email and text with the dealer, and notes of calls (date, time, who).
7. Repair invoices, and receipts for towing, inspections and hire cars.
8. Photos or videos of the fault.
9. An ASIC search for a company dealer (NCAT asks for it).
10. Your demand letters and NSW Fair Trading reference number.

The 5 steps

Step 1: Contact the dealer

Phone the dealer, then email the same day. Describe the fault, when it started and the kilometres, say what you want, and give them 24 hours to respond. Keep a record of every call and message.

Check your evidence first

Step 2: No response or a refusal: send a formal demand

Our letter sets out the car, a schedule of defects, your rights under the ACL and the NSW dealer guarantee, your chosen remedy and a firm deadline. It is also your written proof for every later step.

Send the dealer a formal demand – $49

Step 3: Complain to NSW Fair Trading

Lodge a complaint with NSW Fair Trading, the regulator in the dealer’s state, using the online vehicle complaint form, and attach a copy of your letter to show you tried. Its dispute service is voluntary and it cannot order the dealer to pay or take the car back, and NCAT does not require a complaint first. But it puts the dealer on notice with its regulator and gives you a reference number.

Lodge a NSW Fair Trading complaint

Step 4: Send the final demand

When you have the complaint reference number, send the final demand. It quotes your first letter, the dealer’s response and the reference number, with a short final deadline before NCAT.

Send the final demand – $49

Step 5: Apply to NCAT

Lodge a motor vehicle application with NCAT’s Consumer and Commercial Division through the NSW Online Registry or the paper form, with the dealer’s correct legal name and address for service. Applications are first listed for conciliation and hearing, and NCAT can order payment, work, or repair or replacement of the car or a part. Our Tribunal Application prepares it from your facts and evidence; then follow NCAT’s process to the refund, replacement or repair you chose.

Prepare your tribunal application – $97

Where your claim goes

After you win: getting paid

NCAT does not collect the money for you. If the dealer ignores a money order, you register it with a court and then use the court’s enforcement tools. Enforcement costs are added to the debt.

Step 1: register the NCAT order

Ask NCAT for a certified copy of the money order (no fee). Register it with the Local Court, online through the NSW Online Registry or at a court; for amounts over $100,000, use the District Court. The Local Court charges a filing fee for this. If the Local Court decided your claim instead of NCAT, you already have a judgment and can skip this step.

Enforcement can usually start once the time to pay has passed, unless the dealer has appealed or has applied or agreed to pay by instalments.

Garnishee order on a bank account

A garnishee order tells the dealer’s bank, or anyone else who owes the dealer money, to pay you instead. File Form 69 (notice of motion) with an affidavit sworn no more than 14 days before filing, plus Form 70 (not needed on the Online Registry). Serve a sealed copy on the bank at its address for service; you do not have to send a copy to the dealer. The bank does not have to pay unless the account holds the “weekly compensation amount” used for garnishee orders plus $20. If it falls short, apply for another.

Garnishee order on wages

If the person who owes you earns wages, file Form 69 with Form 71 and serve a sealed copy on the employer, who takes money out of their pay until the debt is paid. Garnishee orders cannot reduce the person’s net weekly wage below the weekly compensation amount, which is adjusted every April and October.

Seizure and sale of property

File Form 65 (notice of motion) and Form 66 (writ for the levy of property), paying the sheriff’s fee when you file. The court sends the writ to the sheriff’s office nearest the debtor.

Finding out what they own

Send an examination notice: Form 51 for an individual, Form 52 for a company. It gives the debtor at least 28 days to answer. If they do not answer, you can apply for an examination order requiring them to attend court.

Enforce your order – $97

NSW Fair Trading head office contacts

Questions people ask

Is there a lemon law in NSW?

No, NSW has no separate lemon law Act, but buyers are well protected. The Australian Consumer Law gives you a refund or replacement for a major failure in a car bought from a dealer. On top of that, the NSW dealer guarantee makes the dealer repair defects in most used cars up to 10 years old and 160,000 km, for 3 months or 5,000 km.

Can I return a used car to a dealer in NSW?

Yes, if the car has a major failure. Under the Australian Consumer Law you can reject it within a reasonable time and choose a full refund or a replacement, and the dealer must collect it if it cannot be moved without significant cost. For a minor failure the dealer may repair it first. Cooling-off for a change of mind applies only with dealer finance.

What is a major failure for a car?

A failure is major if a reasonable buyer who knew about it would not have bought the car, the car is unsafe, it differs significantly from its description, or it is substantially unfit for its normal purpose and cannot be fixed easily and within a reasonable time (ACL s 260). For contracts from 18 December 2020, several minor failures together can also be major.

Does the Australian Consumer Law apply to second-hand cars?

Yes. Second-hand cars bought from a business such as a dealer must be of acceptable quality for their age, price and kilometres, match their description and be fit for any purpose you told the dealer about. The guarantees do not cover most private sales or sales by auction, and “sold as is” wording cannot remove them.

I live in another state – which tribunal do I use?

Use the tribunal in the dealer’s state, so NCAT for a NSW dealer, wherever you live. The one exception: if the dealer is an individual or sole trader rather than a company and you live in a different state, NCAT cannot decide the case (Burns v Corbett) and the claim goes to a NSW court. ACT and NT residents are not affected.

How long do I have to reject a faulty car?

There is no fixed number of days. The ACL lets you reject within a reasonable time, judged by the type of car, how it is used and when the fault would reasonably show up (s 262). That period can run past the NSW dealer guarantee and any manufacturer’s warranty. You lose the right if you sell the car or it is later damaged for an unrelated reason.

Can the dealer refuse a refund and only offer repairs?

Only for a minor failure. For a minor failure the dealer may choose to repair, replace or refund, within a reasonable time. For a major failure the choice between a refund and a replacement is yours under ACL ss 259(3) and 263(4), and the dealer cannot insist on repairs. Several minor failures together can amount to a major one.

What does it cost to go to NCAT?

An individual pays $64 to lodge a motor vehicle claim of up to $10,000, $133 for over $10,000 up to $30,000, and $344 above that (fees from 1 July 2026). So a $5,000 claim costs $64 and a $30,000 claim costs $133. Eligible pensioners and people with legal aid help pay 25%. Companies pay double.

What if the car was on finance?

If the dealer arranged the loan, the lender can be jointly liable with the dealer for your loss, up to the amount financed plus interest and costs (ACL ss 278 and 281). If the sale ends, for example because you rejected the car, the National Credit Code usually lets you end a tied personal loan from a linked lender and recover interest you paid (s 135), unless you approached the lender yourself. Tell both the dealer and the lender.

Can I get my money if I win and the dealer still won’t pay?

It can take extra steps, which the section “After you win: getting paid” explains. If the dealer was licensed, or you reasonably believed it was, and you have taken all reasonable steps to use your legal remedies, you can apply to the Motor Dealers and Repairers Compensation Fund for up to $100,000: within 18 months of the loss or of becoming aware of it, or within 12 months of an unpaid judgment or order obtained inside those 18 months.

Is there a cooling-off period for used cars in NSW?

Only if the dealer provided or arranged your finance. You can then cancel in writing until 5pm on the next day the dealer is open, even after delivery, and pay the dealer the lesser of $250 or 2% of the price. You can sign a form giving up the right. Without dealer finance, and at auctions, there is no cooling-off.

Does the NSW dealer guarantee cover tyres and batteries?

There is no blanket exclusion for tyres or batteries in the NSW Act or the 2025 Regulation. NSW Fair Trading says items that make a car unsafe to drive, such as tyres or brakes, cannot be excluded. The test is whether the problem breaches an ACL guarantee such as acceptable quality, judged for the car’s age and kilometres.

Related guides

• Lemon laws in Australia: every state compared
• ACT, Victoria, Queensland and South Australia lemon laws
• Bought a used car from a dealer and it’s faulty: what now?

Sources

• Motor Dealers and Repairers Act 2013 (NSW), checked 19 October 2026
• Motor Dealers and Repairers Regulation 2025 (NSW), checked 19 October 2026
• Fair Trading Act 1987 (NSW), checked 19 October 2026
• Fair Trading Regulation 2019 (NSW), checked 19 October 2026
• Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Schedule 2), checked 19 October 2026
• Competition and Consumer Regulations 2010 (Cth), checked 19 October 2026
• National Credit Code (National Consumer Credit Protection Act 2009 (Cth), Schedule 1), checked 19 October 2026
• NSW Government: dealer guarantees and warranties, checked 19 October 2026
• NSW Government: buying a used vehicle, checked 19 October 2026
• NSW Government: vehicle warranty and repair disputes, checked 19 October 2026
• NSW Government: vehicle finance and contracts, checked 19 October 2026
• NSW Government: Motor Dealers and Repairers Compensation Fund, checked 19 October 2026
• NSW Fair Trading: contact, checked 19 October 2026
• NCAT: motor vehicles, checked 19 October 2026
• NCAT: fees, checked 19 October 2026
• ACCC: new and second-hand cars, checked 19 October 2026
• ACCC: Motor vehicle sales and repairs, an industry guide to the ACL, checked 19 October 2026
• ACCC: Consumer issues in the sale of second-hand cars (December 2025), checked 19 October 2026
• Vehicle recalls (Australian Government), checked 19 October 2026