By Kevin Peachey
Consumer affairs reporter, BBC News
Cars are often people's second most expensive purchase after their home
A damning verdict on the UK's £24bn secondhand car market has been published by the fair trading watchdog.
One in five of the 3.6 million people buying a secondhand car from a dealer each year experienced a problem, the Office of Fair Trading (OFT) said.
But, following a nine-month study of the market, it decided existing laws were sufficient to clean up the sector.
The industry said car buyers should ensure they use a reputable garage that is a member of a trade association.
Car buyers tend to go to a dealer for "peace of mind" rather than get a cheaper deal from a private buyer, the report argued.
TOP FIVE CONSUMER COMPLAINTS
1. Second-hand cars from independent traders
3. Mobile phone service agreements
4. Mobile phone hardware
5. Laptops, notebooks and tablet PCs
Source: Consumer Direct
Yet, there were 65,000 complaints about these used vehicles bought from dealers to complaints line Consumer Direct in 2009. This was the biggest consumer gripe for the fourth year running.
Some 67% of problems with these cars - often mechanical - came to light within a month of the car being bought.
Under the Sale of Goods Act, the dealer should resolve the problem, with a refund, repair or replacement if the vehicle was defective when sold.
But nearly 30% of buyers asked in an OFT survey said they did not have their problem rectified and instead spent an average of £425 to get it fixed.
The report claimed that dealers often failed to tell customers whether they had made checks on a car's history. Less than 30% of the OFT's mystery shoppers were shown the car's service history.
Other issues highlighted by the report included:
- A £40m a year market in secondhand cars sold by dealers masquerading as private sellers
- The illegal use of disclaimers which say a secondhand car is "sold as seen" or "no refunds" are available
- Increasing the value of a car by £1,700 by illegal clocking - an "invisible crime"
An estimated one in eight cars have a "mileage discrepancy", according to the HPI checking service. Clocking costs consumers an estimated £580m a year in higher prices, with the average car clocked by 67,000 miles.
Some legitimate instances of correcting mileage exist - such as when a counter is broken and replaced, or when a digital counter's software fails.
Secondhand car dealers have not always had the best image
However, the OFT claimed that this was insufficient to keep 50 companies in the UK - which openly offer mileage correction services - in business.
Software is also advertised online by other parties with ways to alter mileage.
The OFT has repeated its recommendation - first called for in 1997 - that a registration scheme be set up for these businesses, or for them to be banned.
It also recommended that MOT test mileage data to be shared with vehicle check companies.
The OFT report concluded that existing laws - most notable the Consumer Protection Regulations that have been in place since May 2008 - are sufficient for dealing with rogue motor traders.
It said that enforcement of these laws was now a priority, but accepted that trading standards departments which policed the sector had limited resources as they are funded by local government.
It wants greater education of consumers about their rights and clear guidance to dealers.
The industry has repeatedly said buyers should go to legitimate companies, and trading standards officers have called on these companies to shop the rogues.
"Car dealers have been seen as a closed shop who do not want to be seen to tell tales out of school," said Peter Stratton, of the Trading Standards Institute.
A car industry trade body said legitimate traders should offer a good service.
"We have been working closely with the OFT on its current investigation into the used car industry," said Paul Williams, chairman of the Retail Motor Industry Federation (RMI).
"We strongly encourage car buyers to go to a reputable garage that is a member of the RMI as we are confident in the standards of excellence that our members deliver.
"Should any problems unexpectedly arise we also offer conciliation services to assist both consumers and garages. We fully support the OFT in its effort to ensure dealers are aware of the law and that these laws are effectively enforced."
AA president Edmund King said the report gave more weight to the fact that buyers should "use their heads not their hearts" when purchasing a vehicle.