Carried out in early 2010, the study took a focused look at the second-hand car market. The study follows concerns about the large number of consumer complaints relating to the sector. Last year, nearly 72,000 consumers complained to Consumer Direct about issues with second-hand car sales.
The purpose of the study was to understand exactly what causes such a high level of consumer complaints and to consider whether existing consumer protection legislation - in particular the Consumer Protection from Unfair Trading Regulations 2008 ('CPRs') - was sufficient and effective in this market.
The study focussed on sales by dealers rather than private sales between individuals, but the findings aim to provide clarity across the wider second-hand car market. The study covers the whole of the UK.
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.
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.
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'.
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.
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.
The market study has given us a much clearer picture of the reasons why a significant number of consumers experience problems buying second-hand cars. We believe that existing consumer protection law, in particular the CPRs, is fit for purpose and has the potential to tackle many of the unfair trading practices we have identified in the market.
We are encouraged by the use already made of the CPRs by many Trading Standards Services in tackling some of the most serious and harmful practices in the second-hand car market. We see a key role for the OFT in providing assistance to Trading Standards Services, in particular in suggesting enforcement priorities, in providing guidance to both enforcers and the industry on our interpretation of the law, and in testing the law where there are any areas of uncertainty about its application.
We have published guidance for second-hand car dealers on compliance with the CPRs and the Sale of Goods Act 1979 (as amended). We launched a public consultation on the draft guidance in December 2009, running until 12 March 2010. Download a copy of the consultation document and the OFT response to the consultation. We published the final guidance in June 2010.
We hope that the information and guidance we issue assists dealers in complying with the law and leads to improvements and fewer complaints from consumers. However, where appropriate, we will not hesitate to take enforcement action against dealers who are engaging in sharp practices that cause serious harm to consumers. Tackling unfair practices in the second-hand car market is now an OFT enforcement priority.
We are enhancing the information available on the Consumer Direct website (now on Directgov: www.direct.gov.uk/consumer) about buying a second-hand car, to make it a more comprehensive source of advice for car buyers.
In July 2010 we will launch a new module of 'Skilled to go' about 'buying and running a car', which will include materials on buying a second hand car. Skilled to go is a free online consumer education resource toolkit designed for use in further and adult education settings. Young people are a key target audience for this module.
The OFT's 1997 report into the sale of second-hand cars recommended that urgent consideration be given to the introduction of legislation to outlaw mileage correction/alteration services and their advertising. We repeat our previous recommendation to Government that consideration should be given to the introduction of legislation to outlaw mileage correction services (unless for specific legitimate reasons) and their advertising.
There are a number of commercial companies who maintain databases of vehicle mileages and offer a checking service to dealers and consumers for a fee. The sooner and more frequently that mileage details are 'captured' the more difficult it is to conceal the falsification of odometer readings.
We recommend that consideration should be given by the Vehicle and Operator Services Agency ('VOSA') to making MOT test mileage data available to vehicle check companies, subject to data protection considerations. Whilst MOT data is only collected after the first three post-registration years, it is a very important source for verifying the accuracy of a vehicle's mileage.
We also recommend that it should be made mandatory for registered keepers to supply a vehicle's mileage when notifying the Driver and Vehicle Licensing Agency ('DVLA') of a change of registered particulars, on the understanding that the DVLA will continue to make this mileage information available to vehicle check companies.
We further recommend that consideration should be given by auction houses, under the auspices of the Retail Motor Industry Federation's Society of Motor Auctions, to making warranted mileage data available to vehicle check companies.
There are a number of important messages for consumers coming out of our work about buying a second-hand car. These messages include:
Ask the dealer the right questions - for example, what mechanical, history and mileage checks have they done on the car you want to buy?
Ask for important information to be put in writing before you buy - don't just rely on verbal claims or promises by the salesman.
Find out about the dealer's customer complaint procedures and whether they are signed up to a Code of Conduct - if a problem does arise after the sale you need to know who to contact.
Remember that if you buy a car from a private seller or an auction, you will have fewer legal rights than when buying from a trader.
Beware of dealers posing as private sellers - warning signs may include:
If you have a problem with a second-hand car, please visit www.adviceguide.org.uk or call the Citizens Advice consumer helpline on 08454 04 05 06. You do have rights when buying a second-hand car from a dealer so don't just give up if the dealer is unhelpful.
Remember that a warranty is an addition to your statutory rights, not a substitute for them. You still have a right to redress against the dealer if the car you purchased from them is not of satisfactory quality.
If you purchase a vehicle with a credit agreement or a credit card, the finance/credit card company may also be in a position to assist if problems arise. However if you purchase with a Hire Purchase agreement, your statutory rights will be solely with the finance company.
The OFT launched a market study into the second-hand car market. The study was prompted by concerns at the large numbers of consumer complaints about the sector. Last year, sales by independent second-hand car dealerships topped the list of complaints to Consumer Direct.
The purpose of the short study was to understand exactly what causes such a high level of consumer complaints and to consider whether existing consumer protection legislation is sufficient and effective in this market.
OFT published research reports from the market study and also consulted on guidance for second hand car dealers on compliance with the Consumer Protection from Unfair Trading Regulations 2008 and the Sale of Goods Act 1979 (as amended).
The consultation period ran from 18 December 2009 until the 12 March 2010.
Details can be found on the consultation page.
We have now published the results of four pieces of research: a consumer survey, a mystery shop study, a survey of used car dealers and a survey of local authority Trading Standards Services.
Queries, as well as comments and submissions on the issues raised by the study should be emailed to firstname.lastname@example.org
They can also be sent to:
Second-hand cars market study
Office of Fair Trading
2-6 Salisbury Square
London EC4Y 8JX
The team leader for the study is Mike Lambourne (020 7211 8568).
The project director is Peter Lukacs (020 7211 8473).
The senior responsible officer is Heather Clayton (020 7211 8826).
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