Can I get out of a contract to buy a car from a car dealer? Your Cooling-off rights

Key Messages:

  • you can cancel a contract with a motor car trader in certain circumstances;
  • act quickly and get advice about what your rights are.

This factsheet provides you information about the right to cancel a contract with a motor car trader using the cooling-off period in the Motor Car Traders Act 1986 (Vic).  The Law Handbook provides information about other rights you might have.

If you want to try to get out of contract with a motor car trader, seek legal advice immediately.  It can be much more difficult – and often impossible – to exercise your rights if you let too much time pass.

THE COOLING-OFF PERIOD

You have the right to cancel a contract to purchase a car from a motor car trader:

  • within 3 clear days after you have signed the contract;
  • unless you have accept delivery of the car within this time.[i]

Three ‘clear days’ does not include the day on which the contract was signed, Saturday, Sunday or a public holiday.[ii]  A notice setting-out your cooling-off rights must be included in the contract.[iii]

HOW TO CANCEL USING COOLING-OFF RIGHTS

STEP 1:  Get advice about all the rights you might have to cancel the contract, including your cooling-off rights.

STEP 2:  Fax a letter to the motor car trader

Cancellation based on the cooling-off right must be in writing.  A sample letter can be found below.

Make sure you keep a copy of your letter and proof that it was received by the motor car trader within three clear days of you signing the contract.

LOSING YOUR COOLING-OFF RIGHTS

For contracts entered into on or after 3 November 2014, your cooling-off rights end if you accept delivery of the car within the 3 day cooling-off period.[iv]

If the motor car trader tells you that you do not have cooling-off rights, get advice to make sure the trader is correct.

PENALTY FOR COOLING-OFF

If you exercise your cooling-off rights, the motor car trader must return any trade-in vehicle and most of the money you have paid, but can keep:

  • for a used car: 1% of the purchase price or $100, whichever is greater;
  • for a new car: 2% of the purchase price or $400, whichever is greater.[v]

You might have other grounds to cancel the contract which do not require the payment of a penalty, so get advice about all your rights.

If the motor car trader does not return your money (less the penalty) or keeps your trade-in vehicle, you can apply to the Victorian Civil and Administrative Tribunal to have the money or trade-in vehicle returned.  If the motor car trader disposes of your trade-in vehicle you can apply to the Motor Car Traders Guarantee Fund for compensation.[vi]

CAR LOANS

If finance has already been arranged, you may need to notify the finance company that you have cancelled the contract to buy the car. Seek advice about what is required in your circumstances.[vii]  You may need to pay finance charges already incurred under the contract.

THE COOLING-OFF RIGHT DOES NOT APPLY IN SOME CIRCUMSTANCES

The 3 day cooling-off period does not apply in all circumstances, such as when:

  • the car is a characterised as a commercial vehicle;
  • the car was bought at public auction;
  • the car was not bought from a motor car trader;
  • you are a body corporate or a motor car trader;
  • you accept delivery of the vehicle within the cooling-off period.[viii]

Sample letter enforcing the cooling-off period

Click here for a template letter which enforces motor car cooling-off rights.

Further Information 

Consumer Affairs Victoria
Tel: 1300 55 81 81

Warning: This fact sheet is for information only and should not be relied upon as legal advice. This information applies only in Victoria, Australia and was updated on 6 June 2017.

[i] Motor Car Traders Act 1986 (Vic) s 43

[ii] Motor Car Traders Act 1986 (Vic) s 43(1A)

[iii] Motor Car Traders Regulations 2008 (Vic) r 22, as amended by Motor Car Traders Amendment (Red Tape Reduction) Regulations 2014 (Vic)

[iv] Motor Car Traders Act 1986 (Vic) s 43(2), as amended by Consumer Affairs Legislation Amendment Act 2014 (Vic) s 39

[v] Motor Car Traders Act 1986 (Vic) s 43(4)

[vi] Motor Car Traders Act 1986 (Vic) s s76(1)(a), (1)(g)

[vii] Sections 21 or 134 of the National Credit Code may provide assistance to consumers wishing to cancel credit contracts in certain circumstances

[viii] Motor Car Traders Act 1986 (Vic) s 43(1), (2), (7)

Image from Kamyar Adl.


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