10 Jul 2026“Lemon law” principles under Australian Consumer Law protect you if you buy a new vehicle which isn’t of acceptable quality – safe, fit for driving consistently and free from material defects. The law gives rights to repairs, a refund or replacement, and pathways for resolving disputes through Fair Trading or NCAT.
Buying a defective vehicle or “lemon”
The process of going to a car dealership, test driving all your favourite looking cars and eventually making the leap to buy a new or used car for yourself is a significant financial decision. You need to be sure the car fits both your budget and your needs.
Most of the time, purchasing a vehicle is a relatively smooth process, with very few hiccups along the way. The automotive industry is highly regulated. Manufacturers have reputations to uphold, meaning that vehicle ownership is often headache-free, especially if you’re buying a new car.
But what happens when a new car has material defects that you were not aware of? What if there is a loose bearing, a complex electrical fault or some other critical problem? Can you return the car? Can you get a refund?
Consumer rights can’t be eroded by contract or seller policies
The Australian Consumer Law works to protect people who buy goods and services from material defects, or other factors that would render the goods unusable.
Appearing at Schedule 2 of the Competition and Consumer Act 2010 (Cth), the ACL explores the various situations where consumer goods may not be up to par. The ACL gives consumers ample protections and rights, which cannot be eroded through contract or seller policies.
One such protection is the guarantee found in section 54 of the ACL, which prescribes that a person supplying goods or services guarantees that those goods are of an acceptable quality.
The phrase “acceptable quality” is taken to mean that the goods are safe, free from defects and fit for all the purposes for which they are commonly supplied. With a new motor vehicle, manufacturers and dealers guarantee that it is safe, fit for driving consistently and free from material defects.
“Lemon law” entitles you to repairs by dealership
If you bought a new vehicle with a defect that you didn’t cause through neglect or improper use, you are entitled to have repairs done by the dealership under section 58 of the ACL.
In Australia, Queensland is the only state which has introduced a specific lemon law and set out the consumer rights under this law. (Please see New ‘lemon laws’ to protect buyers take effect from 1 September, Queensland Government Media Statement, 30 July 2019.)
In the other states there is no lemon law beyond the scope of the ACL. However, many of the principles of that law still apply.
When is a new vehicle classified as a “lemon”?
The term “lemon law” in its widely adopted interpretation is applicable to the situation where a new vehicle has such extensive defects that its buyer is increasingly burdened with repairs, and the dealership, despite its efforts, can’t repair the vehicle to the satisfaction of the buyer and the ACL.
For a new vehicle to classify as a lemon, there must be repeated defects that the consumer was not alerted to before the time of purchase. Those defects must have arisen within a short time of the purchase of the vehicle, and the dealership must have attempted, unsuccessfully, to resolve the defects completely.
What should I do if I’ve bought a lemon?
If you have bought a vehicle that you suspect is a lemon, there are numerous avenues for resolution. The first is often the cheapest and easiest, and does not require the intervention of professionals, unless you choose to involve them.
That option is talking directly with the dealership, which will investigate the problems and records to determine if the vehicle is a lemon.
If that investigation concludes the vehicle is a lemon, you are entitled to either a full refund, or a replacement vehicle of the same type. If not, the next step is to engage with the relevant consumer body your state. In NSW, this is NSW Fair Trading.
The role of NSW Fair Trading
When contacted and provided with all relevant information, NSW Fair Trading assigns the matter to one of its officers, who will investigate the matter independently. At the conclusion of that investigation, you can expect to receive advice regarding next steps and suggestions for the best course of action to address the vehicle’s problems.
It is important to note that the Fair Trading Office is impartial and objective. They do not take sides, nor do they offer legal advice.
Somewhat frustratingly, NSW Fair Trading processes rely entirely on the consent of both parties. So should the dealership or manufacturer refuse to participate, there is a high chance the problems won’t be resolved by Fair Trading officers. (Please see Vehicle warranty and repair disputes, NSW Government.)
NSW Civil and Administrative Tribunal (NCAT)
The final option in the resolution process, if Fair Trading has been unsuccessful, is to approach the appropriate administrative tribunal for an official ruling on the dispute. In NSW this is the NSW Civil and Administrative Tribunal (NCAT).
The NCAT process is designed to be cheap, efficient and conducted without lawyers. However, parties to any NCAT matter may apply for legal representation if the matter calls for it.
NCAT can make orders for the payment of money (such as a full refund or damages), the provision of an additional vehicle to replace the lemon, or for the vehicle to be repaired to the satisfaction of the consumer and the ACL.
It is important to note that the NCAT is generally a “no costs” jurisdiction, meaning that you are not entitled to have your legal costs paid unless there is some particular sequence of events, or conduct that is of such a nature as to warrant such orders.
Being forearmed with legal advice
Before approaching any resolution method, you may wish to seek legal advice.
If you decide to do this, it is important that you provide your lawyer with all documents and correspondence relating to the vehicle, including the receipt for the purchase of the car, details of any meetings with sales representatives, invoices for any repairs completed and copies of communications between you and the dealership.
