Second-hand Vehicles and the CPA

Apart from buying a house, buying a vehicle is for most people the most expensive purchase. But what do you do if you made a bad purchase? Maybe the vehicle has problems, or it broke down soon after you purchased it.

What can you do in such a situation? Most information out there only tells half the story, but in this article, we will step on a few toes and tell you the full story.

This article will focus on second-hand vehicles, but is equally appliable to new vehicles, and, under certain circumstances, other goods bought.

Rights in terms of the CPA

Section 55(2) of the CPA (Consumer Protection Act 68 of 2008) provides that each consumer has the right to receive goods of good quality, durable for a reasonable time and free from defects.

If your second-hand vehicle does not conform to these standards of quality, you have recourse (we will explain against whom) in terms of the CPA.

Section 56(2) of the CPA provides that within 6 months after taking delivery of the second-hand vehicle, if the vehicle does not conform to the standard of quality provided for in Section 55, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense… and the supplier MUST, AT THE DIRECTION OF THE CONSUMER, either repair or replace the vehicle, or refund the consumer the price paid by the consumer for the vehicle. (own emphasis).

Firstly, a refund is available AT YOUR DIRECTION. You do not need to allow the supplier to repair or replace the goods, you can demand a refund as soon as you become aware of the defects.

Secondly, contrary to what the Motor Industry Ombudsman currently recommends, the vehicle is to be returned without penalty and at the supplier’s risk and expense. Recent recommendations from the Motor Industry Ombudsman includes “usage costs” for the usage of the vehicle before it was returned. There is no legal basis to be found for this anywhere in the CPA. The only time a consumer may be liable for usage costs when returning goods, is under Section 20(6)(b), but a return of goods under that Section relates to goods that are not “defective”, but rather “unwanted”.

Usage Costs?

By allowing usage costs, the Motor Industry Ombudsman is negating the effect of the “Implied Warranty of Quality” of Section 56 of the CPA. We will use a simple example to illustrate this untenable interpretation by the Motor Industry Ombudsman:

If you buy a TV with a one-year warranty, and after 5 months the TV stops working due to a manufacturing defect. The TV is repaired or replaced, without charging you for the usage for the past 5 months.

This is the effect of a warranty. A warranty is just that… a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary, within a specified period of time.

We had this argument with the Motor Industry Ombudsman, and they just fail to see the light. We hope that someday they will.

Who is the Supplier?

The CPA provides for remedies against the “supplier” of the vehicle, but who is the supplier? Is it only the dealership? Let’s see…

A “Supplier” is defined as “any person who markets any goods or services”.

Market” means “to promote or supply any goods or services“.

Supply” means to sell, rent, exchange and hire in the ordinary course of business for consideration”.

Most vehicles sold in South Africa are financed by a bank. Are these “financiers” in any way liable under the CPA? This is where we will be stepping on a few toes…

Take a look at your Instalment Sale Agreement, that document that you signed in a state of euphoria, waiting to get behind the wheel of your new vehicle.

Who is identified as the “Seller” in terms of that Agreement? In terms of that Agreement, who sold the vehicle to you?

Some banks shy away from using the terms “seller” and “purchaser” but the substance of the agreement is one of sale and purchase between a seller and purchaser.

The basic principle is as follows: You want to buy a vehicle, but do not have enough cash. The bank, who has enough cash, is willing to allow you to pay the vehicle off over a few years, but they want security for the loan in the form of the vehicle. The simplest way to do this is to buy the vehicle from the dealer and sell it to you in terms of the Instalment Sale Agreement and reserve ownership of the vehicle until payment of the last instalment.

If they were not the seller, how did they become titleholder of the vehicle (look at your vehicle’s registration certificate), if they did not buy the vehicle from the dealer?

If they were not the seller, why is your agreement called an Instalment Sale Agreement, if nothing is sold in terms of that agreement?

So now that we established that the bank sold the vehicle to you, we know that they “sell in the ordinary course of business for consideration”.

And if they do this, it means they “Supply” for purposes of the CPA.

And if they supply, they also “Market“.

And if they market, they fall within the definition of “Supplier” for purposes of enforcing your rights in terms of the CPA.

We know that this is a lot to take in, and the banks have settled with our clients to keep this a secret and out of the press and the courts, but now the secret is out.

Not only can you enforce your rights against the dealer, but you can also enforce your rights against the mighty financial institution, who sold the vehicle to you, and who became part of the supply chain when they did so.

You no longer have to fight the long fight against the dealer, you can add the bank to the party.

The Secret to Successful Enforcement of your Rights

The dealer is not eager to resolve the dispute, because he already received the full purchase price from the bank.

The bank throws their hands in the air and tell you that they only provided “loan finance” to enable you to purchase the vehicle.

All the while, you are paying for a vehicle that you have no or limited use of.

Our advice and the secret to success is simple:

  1. Get the bank’s attention by stopping payments to them pending the resolution of the dispute;
  2. Prevent the bank from taking enforcement action, buy paying your monthly instalments into your attorney’s trust account and have your attorney write a letter to the bank informing them of this;
  3. Soon after the bank is not receiving payments anymore, will they come to the party and resolve the dispute.

We have a few other tricks up our sleeve that we will keep a secret for now. These tricks allow us to not only claim back all the instalments you have paid to the bank, but additional amounts as well.

Conclusion

Your rights in terms of the CPA when you bought a second-hand vehicle, financed by a bank, is not only enforceable against the dealer of the vehicle, but against the bank as well. It is the bank, and not the dealer, who sold the vehicle to you.

Stop wasting time by trying to enforce your rights against a dealer who has no interest in resolving the dispute. Enforce your rights against the one who expects payment from you.

If you want more than just your money back… well, then have a chat with us.