Posted on January 22, 2018.
Used-car dealers avoid paying GST and providing warranty by advertising cars as their own
Some second-hand car dealers are posing as direct sellers to sell their cars in a bid to avoid their warranty obligations under the “lemon law” and to avoid paying the goods and services tax.
In these cases, the second-hand car dealers or their salesmen advertise the cars online as theirs, without telling prospective buyers upfront that they are in fact car dealers or that they are selling the cars on behalf of owners – what the industry calls “consignment cars”.
Second-hand car dealers resort to these tricks because it is easier to sell these cars and they earn more from the sales, said an industry source that tipped The Straits Times off to the practice.
“Buyers are more trusting when they buy cars from direct sellers and they won’t ‘low ball’ them, so as not to offend them,” the source said, referring to how some prospective buyers offer low prices.
“These dealers also earn more money, at least one or two thousands dollars more, because they don’t provide warranty,” he added.
Under the Consumer Protection (Fair Trading) Act introduced in 2012, or what is commonly called the “lemon law”, second-hand car dealers are required to provide a six-month warranty to cover the cars they sell. But direct transactions between buyers and sellers are not covered by the law.
Mr Raymond Tang, a committee member of the Singapore Vehicle Traders Association (SVTA), said that GST savings can be another reason dealers resort to this practice. Transactions between direct buyers and sellers are not subjected to GST, whereas car dealers pay GST for the cars they sell.
He said the practice of car dealers selling their cars as “direct owner” cars is common, and has been going on for years.
A random check by The Straits Times of online car advertisements found numerous such “direct owner” cars that appeared to be linked to second-hand car dealers. Most of these sellers masked their identities by providing only initials and mobile phone numbers in their advertisements.
In one case, an owner advertising a Mini Cooper and a Toyota Estima for sale had a mobile phone number linking him to a car rental firm.
In another case, an owner advertising a Volkswagen Beetle and a Honda Fit for sale was apparently using the same mobile phone number as the person who recruited car salesmen last year to work at the Turf City used car centre.
When contacted, a seller retorted: “I do not need to talk to you if you are not a genuine buyer.”
SVTA president Michael Lim said not all second-hand car dealers are out to dupe buyers. Some dealers may genuinely be selling the cars on behalf of owners who have difficulties selling or transferring the ownership of their cars, when, for example, they have problems with their loans, he noted.
Some buyers found out about the history and ownership of their cars only after the sale, or when the cars gave problems.
In one case, the car dealer who sold an eight-year-old Mini Cooper to interior designer Danielle Teo refused to repair the car’s engine when it had problems about a month after the sale. The dealer claimed Ms Teo was aware it was a direct sale between the seller and buyer and that the dealer was merely acting as a middleman, without an obligation to repair the car.
Ms Teo, 31, eventually took the case to the Small Claims Tribunal and got the dealer to foot about half of the $4,000 repair bill.
Mr Tang said car buyers can minimise their risks by buying cars from SVTA members who are accredited with the Consumers Association of Singapore (Case).
Case has received nine complaints of disputes between buyers and car dealers over the ownership history of cars sold in the past three years. Its executive director Loy York Jiun said buyers should not rely on what the sellers say, and also verify the identity of the current registered car owner through the Land Transport Authority.