However, there is a loophole in this agreement that puts the consumer at a distinct disadvantage.

When financing a vehicle, a consumer is no longer transacting with the dealership. Rather, the dealership transacts with the bank, who purchases the vehicle on the consumer’s behalf. They therefore take ownership of the vehicle until the consumer has fulfilled the credit agreement.

As such, a consumer does not ‘own’ the vehicle until the full loan amount has been settled. This has caused issues previously, whereby courts were unable to defend consumers who had brought forward legal concerns in relation to their vehicles. As the bank or financial institution is not legally recognised as a ‘supplier’, they are not beholden to the legal recourse that dealerships are.

As a consumer, there are avenues of recourse available to ensure protection against the legal loophole involving credit agreements under the Consumer Protection Act:

• New vehicles are purchased with a warranty which ensures any defects are repaired within the warranty period. Second hand vehicles do not.
• Civil damages claim for harm caused as a result of the defect
• The financier has a general purchase agreement with each dealership which usually contains an implied warranty entitling the financier to cancel the agreement and demand a refund of the purchase price and interest. The consumer can therefore ask the financier to cede its right to sue on this provision in order to proceed against the dealership.
• The consumer can sue the financier which would result in the financier suing the dealership for the defective vehicle.

Contact Gumede and Warburton Attorneys for legal advice and assistance with credit agreements and vehicle financing queries today!

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