How to reject a faulty or rusting car in Australia and get a refund: the steps under the Australian Consumer Law

If your car, ute or van has a serious fault, including rust or corrosion that keeps coming back, the Australian Consumer Law may let you reject it and choose a refund or a replacement. The rights do not come from a separate “lemon law”. They come from the consumer guarantees in the Australian Consumer Law, which apply to every make and model and in every state, and which a dealer cannot sign away with a “no warranty” sticker.

This guide sets out the steps in the order they usually happen: work out whether the failure is major, reject the vehicle in writing, deal with the manufacturer, the finance and any low “market value” offer, and then go to your state regulator and tribunal if you need to. Claim Done drafts a written vehicle rejection notice from your answers for a flat A$29. Claim Done is not a law firm and does not give legal advice; your state Fair Trading or consumer affairs office and the ACCC explain these rights for free.

Step 1: Is it a major failure?

A vehicle must be of acceptable quality: as safe, durable and free from defects as a reasonable consumer would expect, given its price, age, kilometres and description (section 54). If it is not, the remedy depends on whether the failure is major or minor.

Under section 260 a failure is major if, for example:

• a reasonable consumer who knew about the fault would not have bought the vehicle;
• the vehicle is substantially unfit for its normal purpose and cannot easily, and within a reasonable time, be fixed;
• it departs significantly from its description; or
• it is unsafe.

For contracts made from 18 December 2020, several minor failures that together would have stopped a reasonable consumer buying the vehicle can also add up to a major failure. Rust that is structural, or that returns after repeated repairs, is the kind of problem people often argue is major. Whether it is depends on the facts, which is why the evidence matters.

If the vehicle is unsafe to drive, stop driving it and put the dealer on notice in writing straight away: our unsafe vehicle defect notice (A$29) does that and asks the dealer to collect it at its cost.

Step 2: Get the evidence first

An independent inspection report is usually the strongest evidence in a rust or defect dispute. Use an inspector who is independent of the dealer and the manufacturer, and do not let anyone cut, grind or treat the affected areas until the vehicle has been inspected and photographed. Photograph the VIN plate and odometer first, then each defect from a distance, mid-range and close up with something for scale.

Our inspection and evidence guide (A$29) gives you a written brief to hand the inspector and a photo plan. If the dealer or manufacturer has already inspected the vehicle and will not show you the result, ask for it in writing with our inspection report request (A$29).

Step 3: Reject the vehicle in writing

If the failure is major, you can reject the vehicle and choose a refund or a replacement of the same type and similar value (section 259(3)). The law says a consumer who rejects goods must tell the supplier that they reject them and why (section 263(1)). A phone call or a vague email asking for “help” can leave room for argument about whether you ever rejected it.

You must reject within a reasonable time. That period depends on the type of vehicle, how it is used, how long it should reasonably stay free of the fault and how long the fault took to show up (section 262). Write down the dates: purchase, when the fault appeared, each repair or treatment, and any inspection.

If the vehicle cannot be driven safely back, or returning it would cost you a lot, the supplier must collect it at its own expense (section 263(3)). Our A$29 vehicle rejection notice sets out the grounds, your choice of refund or replacement, a 14-day deadline and collection, under the dealer law of the dealer’s state.

Step 4: The manufacturer

The statutory refund or replacement is owed by the business that supplied the vehicle, usually the dealer. The manufacturer (or the Australian importer, where the maker has no place of business here) has separate obligations: it is liable for damages where the vehicle is not of acceptable quality (sections 271 and 272), it must honour any warranty it gave, such as an anti-corrosion warranty (section 59), and it must indemnify the dealer (section 274). In practice manufacturers often settle these claims with a buyback, though nothing guarantees one.

To put your claim to the manufacturer in writing, use our manufacturer rust or major failure demand (A$29).

Step 5: A “market value” or Redbook offer

When you reject goods for a major failure and choose a refund, the supplier must refund the money you paid for them (section 263(4)). That is measured by what you paid, not by the vehicle’s current market or trade value, and the Australian Consumer Law does not provide for a deduction for use. If you are offered a Redbook-style figure instead, reply in writing before you sign anything: our market value offer reply (A$29) declines the offer and sets out your figure item by item. Once a figure is agreed, record it properly in a deed of settlement.

Step 6: Finance, and the costs you have paid

If the vehicle is on finance, keep paying while you sort it out and write to the lender. Where the dealer arranged the finance, the lender may be a linked credit provider that can share liability within limits (sections 278 and 279), and you can ask for a hardship arrangement to pause or reduce repayments. Our letter to your lender (A$29) covers the loan payout, linked credit and hardship. If the lender will not help, AFCA is free for consumers.

Costs the failure caused, such as a hire car, towing, an inspection, or rego and insurance on a vehicle you could not use, can be claimed as reasonably foreseeable loss (section 259(4)). Our costs claim letter (A$29) itemises them.

Step 7: If they do not fix it

Lodge a complaint with your state Fair Trading or consumer affairs office, which is free, then send a final demand that quotes your complaint number. Our state faulty car final demand (A$29, a version for each state) does that. After that, the claim goes to the tribunal or court for the dealer’s state: NCAT, VCAT, QCAT, ACAT or NTCAT, or the Magistrates Court in Western Australia, South Australia and Tasmania. We can draft the tribunal application from your answers (A$97); you lodge it and pay the tribunal’s own fee.

If the dealer has closed or gone into liquidation, you may still be able to claim against the manufacturer, a linked lender or through the liquidator. Our closed dealer guide (A$19) shows how to check the business and name the right party.

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