Know Lemon Law of Used Cars - DirectAsia Insurance
In the 1960s, cars that were revealed to have manufacturing defects were called “lemons”. The term has endured over the decades and is now taken to refer to products that turn out to be defective after purchase.
This is an all too common experience. That’s why, in 2012, the Singapore government amended its Consumer Protection (Fair Trading) Act (CPFTA) to include the Lemon Law. The CPFTA was designed to protect consumers from unfair retail practices. You can find the Lemon Law in sections 12A to 12F of the CPFTA.
From September 2012 to February 2018, the Consumers Association of Singapore (CASE) handled more than 1,100 lemon law cases involving used cars—an average of 200 a year. The association says the majority of these disputes were resolved, while one-fourth had to be escalated to the Small Claims Tribunal.
It’s a great reassurance to know that the law protects you should your second-hand car purchase end up being a lemon. However, you also need to understand what the Lemon Law does and doesn’t cover, and how to seek redress through it.
What the Lemon Law does—and does not—cover
Almost all personal properties are covered by the Lemon Law, including:
- Physical goods purchased either online or offline
- Second-hand goods and vehicles
- Goods purchased under hire-purchase or conditional sale agreements, provided that they are not rented or leased
- Display sets, discounted items with minor defects, and sale items, even if they are marked as “non-refundable” or “non-exchangeable”
On the other hand, the following purchases aren’t covered by the Lemon Law:
- Goods that are rented or leased
- Real estate property
- Consumer-to-consumer transactions
- Business-to-business transactions
That means your purchase isn’t covered if you buy a used vehicle from an individual seller, not a dealer. On the other hand, a purchase of a second-hand vehicle from a dealer is covered by the Lemon Law, whether you buy it at a brick-and-mortar shop or from an online used-vehicle marketplace. The law still holds even if the seller has a non-refundable policy or has a sign on the shop saying goods are sold “as is”.
How the Lemon Law protects your used car purchase
So how exactly does the Lemon Law work?
The Lemon Law kicks in if a purchased good is found unsatisfactory or non-conforming to the sales contract at the time of delivery. It also applies when goods are found defective within six months of their purchase.
In the latter case, you can ask the seller to repair or replace the vehicle, and give them a reasonable amount of time to do so. If the seller fails to do so, you can ask either for a reduction of the selling price or to return the vehicle in exchange for a full refund. For many of the disputes CASE has helped resolved, the seller tended to agree to shoulder some of the repair costs.
A few caveats
While the Lemon Law assumes that defects found within six months of purchase already existed at the time of the good’s delivery, the seller may endeavour to prove otherwise. The seller might prove in court that the defect was caused by the user, and only after purchasing and receiving the item.
On the other hand, if you find a defect more than six months after the vehicle’s delivery, the burden of proof is on you. The law also doesn’t apply if you knew of the fault before purchasing the item and bought it anyway, but eventually changed your mind.
There’s also a bit of a grey area within the Lemon Law. In January 2018, a project manager wrote to the Straits Times that the Small Claims Tribunal had taken the dealer’s side in a Lemon Law dispute.
The project manager had bought a second-hand Ford Focus from a dealer a few months before. Within a week of being picked up by the buyer, though, the car broke down due to a faulty fuel pump and gear selector. When the buyer tried to get compensation for the cost of repairs, the dealer denied responsibility, saying the Lemon Law did not apply as there had been no written warranty in the sales contract.
Surprisingly, the judge agreed with the dealer’s perspective.
CASE responded to the letter, saying the Lemon Law does apply even without a written warranty. “Retailers cannot contract out of their obligations under the law,” the association said in its response.
Minimise the risk
Purchasing a second-hand car always comes with the risk of surprises. The longer the car has been in use and the farther the distance it has travelled, the higher the chances of defects and failure. Even with the Lemon Law protecting you, you need to conduct thorough research and inspection so you’ll have a clearer picture of the car’s condition.
The car’s condition and history will also affect the price of your car insurance, so you’ll have to factor that into your budget. You can use a car insurance calculator to find out how much your new old car will cost you in terms of insurance.