A car that breaks down soon after you buy it is stressful enough. When you bought it with a car loan, there are two separate relationships to manage: the dealer who sold you the car, and the lender who lent you the money. Knowing which one is responsible for what helps you act quickly and avoid making the problem worse.
This guide is for buyers who financed a new or used car from a dealer, including business owners who financed a work vehicle. It explains the consumer guarantees that apply to cars, how to tell a major problem from a minor one, and what to do about your loan while the problem is being sorted out. The ACCC and ASIC pages referred to were checked on 10 November 2026.
Your consumer guarantee rights when you buy a car
The ACCC says consumer guarantee rights apply to new and second-hand cars bought from a licensed dealer. Among other things, a car must be of acceptable quality, be fit for any purpose you told the seller about before the sale, and match its description. These rights are automatic. A manufacturer's warranty or an extended warranty is extra, and the ACCC says voluntary warranties cannot replace, change or take away them.
Two common exceptions matter for car buyers:
- Private sales and auctions. The ACCC says most consumer guarantees and state and territory laws don't apply to second-hand cars bought through private or auction sales. If you bought privately, check your rights with your state or territory consumer protection agency.
- Problems you were told about. You are not entitled to a remedy for a problem you knew about or were made aware of before you bought, though you may be for a different problem that was not made clear to you.
Change of mind, finding the car cheaper elsewhere or damage caused by misuse are also not covered.
Buying for your business
A business can be a consumer too. The ACCC says a product bought for business use is covered by the consumer guarantees if it costs less than $100,000 including GST, is commonly bought for personal or household use, or is a vehicle or trailer used mainly to transport goods on public roads. A work ute or van financed through a chattel mortgage can qualify on those tests. Exceptions apply, for example goods bought to resupply.
Major or minor? A quick worksheet
What the dealer must offer depends on how serious the problem is. The ACCC lists a major problem with a product as one where it:
- is unsafe
- is very different from the description
- has one serious problem, or several smaller problems, that would have stopped someone buying it if they had known
- can't be used for its normal purpose, or a purpose you told the seller about, and can't easily be fixed within a reasonable time.
Before you contact the dealer, write down:
1. What happened, when, and the odometer reading each time.
2. Whether the car is drivable and safe.
3. Every repair attempt so far, with job cards or invoices.
4. Anything the dealer told you about the car's condition before you bought it, and the advertisement if you kept it.
That record is the evidence you will need whichever way the problem goes.
What the dealer must do
For a major problem, the ACCC says the business must give you the choice of a refund or a replacement of the same type. A refund should be the full amount you paid, with no deduction for the use you have had, and you can instead choose to keep the product and be compensated for the drop in value. In some cases you may also be entitled to compensation for other losses.
For a minor problem, the business must fix it free of charge. If it can't or won't repair it within a reasonable time, you can have it fixed elsewhere and claim the reasonable cost, or ask for a refund or replacement.
Go back to the dealer you bought from. The ACCC says the dealer must assist and must not tell you to go to the manufacturer for a remedy.
What to do about your car loan
Your car loan is a contract with your lender, separate from the sale contract with the dealer. A dispute about the car does not change what your loan contract says about repayments, so plan on the basis that they continue until something is agreed in writing. ASIC has described buyers of poor quality cars on credit who end up with no car and ongoing debts, and has noted that the law on faulty cars is complex, involving a mix of state and federal laws.
Practical steps:
- Keep paying while you sort it out, if you can. Your contract sets out the fees for late payment, and missed payments can be recorded in the repayment history on your credit report, as our guide to fixing a credit report error explains. Winning the dispute with the dealer does not undo either.
- Tell your lender early if the car is off the road and repayments are hard to meet. Our guide to car loan hardship help explains what you can ask for.
- If a refund is agreed, get a payout figure first. A refund is based on the price paid for the car. Your loan payout figure can be higher, because of interest accrued, fees and any early repayment cost. Ask the lender for a written payout figure and agree with the dealer, in writing, how the refund will be paid to the lender. Our guide on paying out a car loan early explains payout figures.
- If you get a replacement car, ask the lender how the security on the loan will be changed to the new vehicle, and get that confirmed before you hand back the old one.
- Keep everything in writing, including any dealer offer, so you can show your lender what was agreed.
If the dealer will not fix the problem, the ACCC points to state and territory consumer protection agencies, legal advice centres and small claims courts and tribunals. If your complaint is about how the lender has treated you, our guide to complaining about a lender to AFCA explains the process.
Before your next car purchase
A few checks at the start reduce the risk later:
- Buying from a licensed dealer gives you consumer guarantee rights that most private sales don't. If you do buy privately, our guide to personal loans for private sale cars covers the PPSR check.
- Ask what an extended warranty adds before you pay for it, as the ACCC says it may or may not give you rights beyond those you already have.
- Read the loan contract before you sign. Our loan contract checklist shows what to reconcile.
When you are ready to compare finance for your next car, you can explore car loan options with us.
This article summarises ACCC and ASIC guidance checked on 10 November 2026. Consumer law and state rules vary with your circumstances. This article is general information only and is not legal or financial advice. For your situation, contact your state or territory consumer protection agency or a legal advice centre.
