‘Lemon law’ needed more urgently than ever

 

With car sales recording a surprising new high last year, it is getting more and more important to have a “lemon law” that protects car buyers who purchase defective vehicles.

While it was encouraging to note that the government is considering the legislation, the minister of domestic trade and cost of living, Armizan Mohd Ali, appeared to be a bit waffly about protecting consumer rights as a matter of importance and urgency.

“Once the study is completed, a policy decision will be made at the ministry level before the legal framework is carried out,” he said in a written reply in Parliament on March 8.

Perhaps the minister should set himself and his ministry a time frame of passing a lemon law within three sittings of Parliament and demonstrate the government’s purposiveness in protecting car buyers.

With about 2.4 million people buying a new or used car every year, even if just 1% of that had bought a “lemon” – a defective car – that would be about 24,000 unhappy customers.

Last year, 799,000 new cars were sold. Used car sales would have been double that, employing a rule of thumb frequently employed by the king of used car sales, Tony Khor, the president of the Federation of Motor and Credit Companies Association of Malaysia.

The Consumers’ Association of Penang has a deep perception of car buyers complaints. In 2019, it issued a press statement calling on the government to legislate a lemon law.

It called on the government to consider the lemon law as incorporated by Singapore in its consumer protection legislation, and said Malaysia could similarly do so with our Consumer Protection Act 1999.

The used car business has its own share of bad press. One of the most common complaints by Malaysian car buyers is about misleading advertising.

Industry expert Khoo Kah Jin says: “A car was advertised for sale at below the market price. Subsequently when the buyer came to view the car and sign the sales order, he was told that the cost was a few thousand extra for service fee etc.”

“This unethical business practice can be stopped,” says Khoo, who is honorary secretary of the Federation of Motor and Credit Companies Association of Malaysia. “There should only be the price (without insurance) as advertised and no other things like service charges.”

“In this type of case of misleading advertising, the car buyer should complain to the domestic trade and cost of living ministry. We’re also recommending to the government to make membership of our federation mandatory for used car dealers,” he said.

It’s estimated that there are about 8,000 used car traders in Malaysia of which about half are members of the federation.

The proposed lemon laws must consider the ongoing transition of cars from combustion engines to electricity.

In the case of electrified cars, batteries are a major cost element of the vehicle and technical standards are in their infancy regarding batteries’ state of health.

Here are five countries known for having strong consumer protection laws concerning lemon cars:

Each state in the US has its own lemon laws providing consumers with recourse if they purchase a defective vehicle.

German consumer protection laws are comprehensive, including provisions related to defective vehicles

Lemon laws in Canada provide consumers with options for recourse if they purchase a faulty car.

Australian car buyers can seek remedies under the lemon laws if they purchase a vehicle with significant issues.

Lemon laws in the UK provide consumers with options for repair, replacement, or refund if they purchase a defective vehicle.

With Proton-Geely, BYD, Chery, Great Wall Motor, and SAIC, increasing their market share in Malaysia, the domestic trade ministry should also take note of China’s laws.

Those consumer protection laws provide consumers with the right to a replacement or refund for a vehicle with significant defects or issues that cannot be repaired after a reasonable number of attempts. The laws aim to ensure that car buyers are not stuck with vehicles that have persistent issues.

In the case of used cars, if there are so many cases – one estimate is that 50% of complaints collected by consumer protection agencies revolve around cars – why don’t Malaysians buy from used-car portals which are superior to used-car dealers in terms of transparency and warranties.

The top four car portals – Carsome, Mytukar, Mudah.my, Carlist.my – have gained a significant market share.

The prosperity of most of the used car dealers comes from a growing market; it might not be that way if it were a zero-sum game.

The strength of traditional used car dealers alongside disruptive technology in the form of used car portals can be understood through the lens of behavioral economics, particularly the principles of inertia and loss aversion.

Car buyers often stick with familiar options, even if newer alternatives may offer more benefits. Traditional used car dealers have been around for a long time, and they have a database of repeat customers. There’s a lot to be said for a used car lot where one trundles in with an old car and trades it in for something which catches one’s fancy.

People are wary of scammers especially for transactions where it’s a direct negotiation between buyer and seller.

In conclusion, a lemon law for Malaysia is long overdue and the domestic trade and cost of living minister should accelerate his pace of legislation or demote non-performing officers. - FMT

Yamin Vong can be contacted at FB yamin.com.my.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.