An OFT study has found that the £24 billion second-hand car dealer market is often not working well for consumers.
The report found that most used car faults come to light in the first three months after purchase, suggesting many second-hand cars sold are not of satisfactory quality. In this situation it is the the dealer's responsibility to fix the problem.
Despite this, nearly 30 per cent of buyers surveyed who contacted their dealer about a problem said they did not have problems resolved.
Consumers who had this problem spend an estimated £425 each, or £85 million per year in total, fixing unresolved faults that are the dealer's responsibility to correct.
The report also found that:
* many dealers are illegally falsifying a vehicle’s mileage (clocking)
* some dealers are pretending to be private sellers in order to avoid their legal responsibilities to consumers
* one in eleven car dealers use illegal disclaimers about the car's history and condition, such as that a car is 'sold as seen' or 'No Refund'
* many dealers fail to disclose what mechanical and other pre-sale checks they have carried out
While the OFT believes that current laws are strong enough, more needs to be done to make sure:
* dealers are aware of the law
* consumers are aware of their rights
* dealers who fail to comply face a real threat of prosecution
We found that the market is often not working well for consumers. We believe that the relevant legislation is sufficient but more needs to be done to ensure dealers are aware of the law, consumers are aware of their rights, and dealers who fail to comply face a real threat of effective enforcement action by Trading Standards and the OFT.
Faulty cars and poor after sales service
Our consumer survey findings, together with other anecdotal evidence, suggest that a significant minority of dealers appear to have a lack of interest in customer care once a sale has been agreed, with poor standards of after sales service and a disregard for their obligations under sale of goods law where cars sold are not of satisfactory quality. We estimate that the total cost to consumers of fixing problems that dealers have a legal obligation to resolve but fail to do so is at least £85 million per year.
Pre-sale history checks and information disclosure
Consumers rely on dealers to check a car's history and to disclose any important information prior to sale. However, we found that a significant number of dealers are failing to tell consumers whether they have carried out such checks, leaving buyers in a potentially vulnerable position. Our mystery shop also found that over one quarter of shoppers felt the information they received about the target vehicle and services available at the dealership was either 'insufficient' or 'extremely insufficient'.
Clocking - the practice of deliberately interfering with a vehicle's odometer so that a lower mileage is displayed - remains a persistent and damaging consumer crime. We estimate the potential loss to consumers from the purchase of vehicles with false mileage would be up to £580 million a year, if all consumers were unaware of the false mileage.
We believe that occasions where there are legitimate reasons to correct a car's mileage are very rare. Yet there are over 50 businesses in the UK openly offering 'mileage correction services'. We have a strong suspicion that many of these companies adjust mileages for illegitimate reasons. We take the view that the commercial practices of mileage correction businesses may breach the CPRs where the provision of such services is 'directly connected with the … promotion, sale or supply of a car to consumers'.
Traders posing as private sellers
The decline in the use of traditional forecourts has resulted in an increased ability for dealers to masquerade as a private seller in an attempt to avoid their legal responsibilities and liabilities. We estimate that the value of second-hand cars sold by traders disguised as private sellers is approximately £41.4 million a year.
Consumer information and advice
Markets work well when consumers are empowered, well informed and have the skills and confidence to put this into action. However, our consumer survey found that nearly two thirds of buyers don't get any general pre-shopping advice about buying a second-hand car before they make a purchase from a dealer.
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