Introduction
During the pandemic the motor industry has increasingly sold vehicles online and at a distance. Despite this and the fact that the Regulations have been in place since 2013, there are still a number of members with questions regarding how they work and what they are required to do. With society starting to open up again it is more important than ever that members understand the regulations and how they apply.
Distance Selling
The current protections for sales at a distance are the Consumer Contracts (Information Cancellation and Miscellaneous Charges) Regulations 2013 (the Regulations). These can be found at
https://www.legislation.gov.uk/uksi/2013/3134/contents/made
Who do the Regulations apply to?
The Regulations apply to any distance and off-premises contracts (see below) between a ‘Consumer’ and a ‘Trader’.
To be a consumer a person must be ‘an individual’ acting ‘wholly or mainly outside (their) trade, business, craft or profession’. As such any corporate entities such as Limited Companies or Partnerships would never be able to be a consumer.
It should be noted that the Regulations acknowledge that some transactions that are obliquely related to a business may still be covered.
When do the Regulations apply?
The Regulations deal with more than just distance selling. They divide transactions into 3 categories:-
Distance Contract- A contract concluded without the simultaneous physical presence of the trader and the consumer. Distance sales were not common prior to the pandemic but are automatic during any lockdown period.
On-premises Contract- A contract entered into on business premises where customers are able to view the vehicle at a showroom prior to buying it. This is the vast majority of sales pre-lockdown.
Off-premises Contract- An off-premises contract is a contract which is either concluded in a place which is not the business premises of the trader, where an offer was made by the consumer in a place which is not the business premises of the trader, or concluded on the business premises of the trader immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader, such as during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer. These contracts are rare in the motor industry generally, but can be found where it is common to attend trade events and shows.
What Protections do the Regulations provide in a Distance Contract?
The Regulations will give the consumer 2 main rights:-
- the right to certain information in writing at or before the date of the contract;
- a cooling off period, or a right to change their mind.
What Information do I need to provide in a Distance Contract
The Regulations require the trader to give or make available to the consumer in writing the following information:-
- the main characteristics of the goods or services;
- the identity of the trader (such as the trader’s trading name);
- the geographical address at which the trader is established and, where available, the trader’s telephone number, fax number and e-mail address, to enable the consumer to contact the trader quickly and communicate efficiently;
- where the trader is acting on behalf of another trader, the geographical address and identity of that other trader;
- the total price of the goods or services inclusive of taxes, or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated;
- all additional delivery charges and any other costs or, where those charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable;
- in the case of a contract of indeterminate duration or a contract containing a subscription, the total costs per billing period or (where such contracts are charged at a fixed rate) the total monthly costs;
- the cost of using the means of distance communication for the conclusion of the contract where that cost is calculated other than at the basic rate;
- the arrangements for payment, delivery, performance, and the time by which the trader undertakes to deliver the goods or to perform the services;
- where applicable, the trader’s complaint handling policy;
- where a right to cancel exists, the conditions, time limit and procedures for exercising that right;
- where applicable, that the consumer will have to bear the cost of returning the goods in case of cancellation and, for distance contracts, if the goods, by their nature, cannot normally be returned by post, the cost of returning the goods;
- that, if the consumer exercises the right to cancel, the consumer is to be liable to pay the trader reasonable costs;
- where under Regulations 28, 36 or 37 there is no right to cancel or the right to cancel may be lost, the information that the consumer will not benefit from a right to cancel, or the circumstances under which the consumer loses the right to cancel;
- in the case of a sales contract, a reminder that the trader is under a legal duty to supply goods that are in conformity with the contract;
- where applicable, the existence and the conditions of after-sale customer assistance, after-sale services and commercial guarantees;
- the existence of relevant codes of conduct, as defined in Regulation 5(3)(b) of the Consumer Protection from Unfair Trading Regulations 2008, and how copies of them can be obtained, where applicable;
- the duration of the contract, where applicable, or, if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating the contract;
- where applicable, the minimum duration of the consumer’s obligations under the contract;
- where applicable, the existence and the conditions of deposits or other financial guarantees to be paid or provided by the consumer at the request of the trader;
- where applicable, the functionality, including applicable technical protection measures, of digital content;
- where applicable, any relevant compatibility of digital content with hardware and software that the trader is aware of or can reasonably be expected to have been aware of;
- where applicable, the possibility of having recourse to an out-of-court complaint and redress mechanism, to which the trader is subject, and the methods for having access to it.
What is the Cooling off right?
Under the Regulations consumers have the right to 14 days from the date of delivery of the goods (or from ordering the services) to change their minds. A trader is entitled to charge a fee for any use of the goods during this period but only if the correct information is provided at the time of delivery
What happens if I do not provide the correct information or tell Consumers of the cooling off?
If Consumers are not provided with the correct information then :-
- the contract is not binding;
- where consumers are not told of the rights of cooling off/cancellation then they can cancel the contract up to 12 months and 14 days later;
- Where consumers are not told in writing that there will be a deduction for the use, then the consumers are entitled to the full price paid with no deductions.
It is criminal offence not to provide the correct information or tell consumers of the cooling off rights. It is vital that members have the right terms and conditions. The RMI can provide example terms and conditions on request.
Deductions for use.
Under the Regulations, provided the consumer has been notified in writing that a deduction will be made in the event of cancellation, then you can make a deduction :-
… if the value of the goods is diminished … as a result of handling of the goods by the consumer beyond what is necessary to establish the nature, characteristics and functioning of the goods,[1]
The Regulations are not specific to the motor industry but you will be able to make a deduction for:-
- any mileage covered beyond that necessary to establish the nature and characteristics of the goods;
- any damage to the vehicle;
- any modifications not included in the original contract;
- tax.
The important part here is that any deduction can only be made for any reduction in value beyond what is necessary to establish the nature, characteristics and functioning of the goods. You will not be able to make a deduction for anything that is a basic necessity to allow the customer to assess the goods, this is likely to include:-
- the fact that the vehicle is now a ‘used’ vehicle;
- any additional registered keeper (s);
- any pure depreciation.
How do I calculate any deductions for use
There is no fixed calculation. The only guidance in the legislation is the quote above.
In the motor industry there are 2 general ways of calculation a pence per mile deduction and a reduction in value :-
- Pence Per Mile Deduction
This allows for a quick calculation and can be very useful for new vehicles where the majority of any reduction in value cannot be deducted (i.e. vehicle registration, another owner, depreciation etc…). That said, there is no fixed amount. Courts have used £0.10, £0.20, £0.45, £0.50. Where you are considering a pence per mile calculation we would advise this is included in the contract so that the amount used is known in advance. Be warned, this amount must be justifiable as if in punitive then no deduction will be allowed.
- Reduction In Value Calculation
This involves using a valuation guide to calculate the value of the vehicle at the mileage at the time of sale, and then again at the mileage at the time of return and subtracting one from the other, the difference is then the amount deducted from the purchase price for use.
This allows for a more accurate reduction and can be very useful for used vehicles where the reduction in value due to another owner or depreciation has less of an impact. It can also take into consideration any general changes in condition (i.e. valuation at sale, good valuation at return in poor condition etc.)
Whichever method is used, there will also be deductions for any damage or the condition of the vehicle on return that can be added to this.
None of these methods will produce an appropriate value on all occasions, and should be used as the basis of a negotiation as appropriate.
Frequently Asked Questions
If I take a deposit over the phone is that a distance contract?
It depends. To be a distance contract the entire contract has to be concluded at a distance. Normally customers will attend premises at some stage to view the vehicle and negotiate prior to sale. During the lockdown period this has not been possible and so ALL vehicle sales commenced and concluded during a period of lockdown will be distance sales.
If a vehicle is collected from my premises, is this still a distance sale?
It depends. The question becomes at what stage the vehicle is collected. If the contract is finalised and the customer has no option but to drive away then this is still a distance contract. If the customer can still walk away and get their money back, then it is not.
Do the regulations apply in the same way to new and used vehicles?
Yes. The only difference is that the losses incurred in the event of a cancellation during the cooling off period are likely to be greater for new vehicles than for used.
If I sell the vehicle on eBay do the Regulations still apply?
Yes. The Regulations were designed to give protection in an eBay type auction.
If they apply to eBay, do the Regulations apply to all auctions?
No. If the customer has the opportunity to attend the auction in person then the Regulations do not apply. The customer does not have to attend and may have bid online, but if the auction was held in public then the Regulations are excluded.
I am a repairing garage but sometimes I buy and sell vehicles that have failed their MOT. As I am not a sales garage do the regulations still apply?
It depends, but it is likely. The Regulations apply where you are acting for purposes relating to your trade, business, craft or profession. It is unclear where a mechanic becomes a salesman and it would be up to a Judge on any individual case. That said it is for you to prove that you do not trade in vehicles. Unless it truly is a personal vehicle and this is made fully clear at all times then it is likely a court will apply the Regulations if the vehicle is sold to a consumer.
Conclusions
Distance and off-premises sales come with obligations that make them more complex. Most businesses are concerned about the cooling off/ cancellation rights, and with motor vehicles the costs of a cancellation can be high. However properly managed the risk will last for only 14 days from delivery and deduction for any use can be made. The costs of selling vehicles at a distance are higher as a proportion of the costs will not be recovered in the event of a cancellation. All else being equal, vehicles sold at a distance would have to be priced higher as a result.
This advice is general in nature and will need to be tailored to any one particular situation. This is not a definitive guide to the Regulations and how they apply to your business. Neither does this deal with all the changes. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.
Motor Industry Legal Services
Motor Industry Legal Services (MILS Legal Ltd) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.
[1] Consumer Contracts (Information Cancellation and Miscellaneous Charges) Regulations 2013 (Consumer Contracts) Regulations 2013, s34(9)
