Landmark court decision protects used-car buyers

Mar 29, 2023 | Blog | 0 comments

A landmark court decision has set a precedent that will offer anyone buying a used vehicle a much higher level of protection through increased transparency about a vehicle’s history. The magistrate found in favour of an unsuspecting consumer who was sold a previously written-off vehicle. The dealer was ordered to refund the client the full outstanding financed value of the car plus interest, even though the dealer was also unaware that the vehicle had been written off beforehand.

The decision has been welcomed by both the SA Motor Body Repairers Association (Sambra) and the National Automobile Dealers’ Association (NADA)

Accident-damaged vehicles are generally written off by an insurer if deemed uneconomical to repair. If this is the case, “the vehicle should be recoded on the National Traffic Information System (NaTIS) as a code 3 vehicle, which will inform any future or prospective buyers of a damaged or salvaged vehicle that will require extensive expenses to restore,” says Charles Canning of Sambra. “Typically, insurers dispose of these vehicles at auctions, where they are bought and repaired, often to substandard specification, by unscrupulous repairers, and subsequently sold to unsuspecting consumers. This decision will ensure buyers of used vehicles have access to and are fully aware of the condition and status of the vehicle. It will prevent situations such as that which the Gauteng regional court has ruled on.”

Canning said that Sambra had been lobbying for many years to get the South African Insurance Association (SAIA) to facilitate increased transparency through the public having access to a vehicle salvage database (VSD) that would allow would-be buyers, whether private individuals or car dealers, to check the status of a vehicle. He reported that SAIA has agreed this VSD will be published “towards the end of the first quarter of 2023”.

The plaintiff/buyer had approached Sambra for help after buying a vehicle from a dealership online. The vehicle had not been given a detailed inspection by either the seller or the buyer. Sambra arranged for a specialist assessor to inspect the vehicle, who established that the vehicle had been involved in a major accident resulting in a damaged chassis and was not mechanically sound or safe to drive.

On further investigation, it was revealed that the vehicle had been written off by the previous owner’s insurance company, and then sold at auction and returned to the marketplace.

South Africans are increasingly choosing to buy pre-owned vehicles for various reasons. TransUnion, one of three major credit bureaus in South Africa, says that consumers are “opting for older models as premium used vehicles are scarce and their disposable incomes remain severely constrained”.

The vehicle price index .or VPI for new and used vehicles moved from 2% and 7% respectively in Q4 of 2021 to 7% and 9.1% in the same quarter of last year, with used vehicle pricing up for the 14th consecutive year.

Jakkie Olivier, CEO of the Retail Motor Industry Organisation (RMI), says that RMI is in support of the publication of a vehicle salvage database that lists vehicles that have been written off by insurance companies. However, he added that the VSD would only cover about 30% of the insured car market, with the majority of the vehicles on South African roads uninsured.