27/10    18 March 2010

The OFT has identified a number of concerns in the £24bn second hand car dealer market and is set to crack down on dealers who break the law.

The OFT has today published its market study into second hand car sales by franchised and independent dealers which finds the market is often not working well for consumers. The OFT believes 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.

The OFT's report finds that:

• The vast majority of all second hand car faults come to light in the first three months, suggesting many second hand cars sold may not be of satisfactory quality, and are consequently the dealer's responsibility to fix. Despite this, nearly 30 per cent of buyers surveyed who contacted their dealer about a problem said they did not have problems rectified. 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 obligation to correct. 
• Consumers could potentially over-pay to the tune of around £580million a year as a result of illegal clocking, which involves adjusting a vehicle to show false mileage. The OFT's study concludes that legitimate reasons for adjusting a vehicle's mileage are very rare, but despite this has identified 50 businesses openly offering 'mileage correction services'. The report makes a number of recommendations aimed at reducing this problem. 
• Some dealers may be in breach of the law by pretending to be private sellers to evade their legal obligations to consumers, often to offload unsafe or clocked cars, which the OFT estimates accounts for more than £40 million of second hand car sales annually.
• One in eleven car dealers rely on 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. The OFT also found one in four dealers failed to supply sufficient information about the vehicle.

The OFT has produced new guidance for the car industry providing clarity on the Sale of Goods Act and Consumer Protection from Unfair Trading Regulations. Though it is hoped this guidance improves business practices in the market and reduces complaints, if matters don't improve, the market study has provided the OFT with clear enforcement priorities.

Heather Clayton, Senior Director of the Office of Fair Trading's Consumer group, said:

'Buying a second hand car is an expensive purchase for many people. Many dealers provide high standards of service and comply fully with the law but there continues to be high numbers of complaints to Consumer Direct which are often due to dealers' refusing to deal with legitimate complaints or provide appropriate redress.

'We are issuing OFT's guidance to the industry and expect all second hand car dealers to be aware of their legal obligations. Along with our Trading Standards partners, we will take action against those dealers who continue to ignore the law.'

The market study was prompted by consistently high numbers of consumer complaints. Last year saw a rise of five per cent in complaints about second hand car sales with nearly 72,000 consumers reporting problems to the OFT-operated advice service Consumer Direct, making it the most complained about sector.

NOTES

1. The study focused on sales by dealers rather than private sales between individuals. The study worked closely with the second-hand car industry, local authority Trading Standards Services, consumer bodies and other interested parties.

2. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows a market-wide consideration of both competition and consumer issues.

3. The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) contains a general prohibition against unfair commercial practices and, in particular prohibitions against misleading actions, misleading omissions and aggressive commercial practices. The Regulations are enforceable through the civil and criminal courts.

4. The Sale of Goods Act 1979 requires among other things that a car is of satisfactory quality or fit for its purpose when it is sold.

5. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers who are concerned they have been unfairly treated by a company can contact Consumer Direct (tel: 08454 04 05 06, or visit the Consumer Direct website).