Can I sue both the car dealership and the finance company if the car I bought on credit is a lemon?
Quick Summary
Yes, you can likely hold both the dealership and the finance company responsible. Because your credit agreement is linked to the car purchase, they are jointly and severally liable for your losses.
The situation
I am writing to you from Melbourne, Victoria, because I am in a bit of a nightmare regarding a car I purchased. On 14 January 2024, I went to a local dealership and signed a contract to buy a second-hand SUV for $28,500. Because I didn't have the full amount upfront, I also signed a linked credit agreement with the dealership's preferred finance provider to cover the cost through monthly instalments. Everything seemed fine until about three weeks ago, in mid-February, when the engine completely failed due to a major mechanical fault that was clearly present before I took delivery. I have already spoken to the dealership, but they are claiming it is a matter for the finance company to handle, while the finance company is telling me that I need to deal solely with the dealer since they didn't sell the actual vehicle. I have been making my monthly pay cheque instalments on time, but I am now stuck with a broken car and a debt I cannot use. I am unsure if I can legally hold both the car seller and the finance company responsible together for the repair costs or a full refund of my deposit, or if I am forced to pick just one of them to chase for my money.
Detailed Analysis
Under Australian Consumer Law, because your credit agreement was provided by the dealership's preferred provider, it is considered a 'linked credit contract'[1]. This means the dealership (the supplier) and the finance company (the linked credit provider) share responsibility for problems with the goods you bought.
Specifically, the law states that if a consumer suffers loss or damage due to a "failure to comply with a guarantee that applies... in relation to a related supply," the linked credit provider and the supplier are "jointly and severally liable to the consumer for the amount of the loss or damage"[1]. 'Joint and several liability' is a legal term meaning you can sue both parties together, or you can choose to sue just one of them for the full amount of your loss. In your case, the engine failure appearing to be a pre-existing fault likely constitutes a failure to comply with consumer guarantees regarding acceptable quality.
If you decide to take legal action in court, you must follow specific rules. The law requires that "the consumer must bring the action against the linked credit provider and the supplier jointly"[2]. This means you cannot pick just one to sue in court; you must name both in your claim.
However, there are limits on how you can collect money from the finance company. If you win a judgment against both, you cannot force the finance company to pay you until you have first made a written demand for payment to the dealership and that demand has remained unsatisfied for at least 30 days[3]. Additionally, the finance company's total liability is capped at the amount you financed plus interest and legal costs.
Note that state, provincial, or local laws in Victoria may add further rules regarding consumer rights or small claims procedures.
Statutory Citations
Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 278 — Liability of suppliers and linked credit providers relating to linked credit contracts
"the linked credit provider who is a party to the contract, and the supplier of a related supply, are jointly and severally liable to the consumer for the amount of the loss or damage"View Official Legislation →
Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 279 — Action by consumer to recover amount of loss or damage
"The consumer must bring the action against the linked credit provider and the supplier jointly."View Official Legislation →
Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 283 — Enforcement of judgments etc.
"the judgment must not be enforced against the credit provider unless a written demand made on the supplier for satisfaction of the judgment has remained unsatisfied for at least 30 days."View Official Legislation →
Important Legal Disclaimer
General legal information, not formal legal advice. The information provided on LawAsked does not constitute formal legal advice and creates no attorney-client relationship. If you require legal assistance, please consult a licensed attorney in your jurisdiction.
Have a situation like this?
Ask the AI Lawyer app about your specific case.
Related Questions
- Who can I sue for a faulty heater if the brand name is missing?
- Can I force a dodgy local shop to give me my money back and stop selling faulty items?
- Can I sue the finance company for a faulty car if they didn't sell it to me directly?
- Can I sue both the shop and the finance company together for my faulty fridge?