Risks of financing used cars subject to compulsory recall

The Assistant Minister to the Treasurer has issued a compulsory recall for all vehicles with defective Takata airbags, following an ACCC safety investigation.

The compulsory recall applies to all vehicles that are subject to existing Takata voluntary recalls and approximately 1.3 million additional vehicles that were not voluntarily recalled.

The compulsory recall requires suppliers of vehicles with defective Takata airbags to replace all defective Takata airbags in Australian vehicles by 31 December 2020 (or later in some instances if approved by the ACCC). Some vehicles will be recalled immediately, and others on a rolling basis, scheduled based on various factors including relative safety risk. This means that not all vehicles will be recalled straight away.

The ACCC has urged drivers to check whether their vehicle is affected, and if so, whether it is under active or future recall.

The recall register can be searched by car registration number to find out if the vehicle is under active recall or is subject to a future recall.

If a lender is financing the purchase of a used car they should check whether the vehicle is affected by the recall including whether it is subject to an active recall.

If it is subject to an active recall, lenders should note that the Recall Notice prohibits the sale of vehicles with Affected Takata Airbag Inflators that are under active recall by a vehicle manufacturer.

Businesses must not sell cars that are under active recall before having the defective Takata airbag replaced. Businesses that fail to do so may face penalties for non-compliance with the compulsory recall.

Regardless of whether a person bought their vehicle brand new or second hand (including from a private seller), they are entitled to receive a replacement airbag free of charge from the manufacturer.

If recall action is not yet initiated for the car, and the second-hand dealer knows that the vehicle is subject to future recall, then the dealer can still sell it, provided they inform the buyer about the future recall. They must also advise the buyer of the risk associated with the airbag. This information must be given to the buyer verbally and in writing.

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