Charging up to $2,000 for what it described as "free" warranties cost car dealer Greymouth Car Centre Limited a $7,000 fine in the Greymouth District Court today. Court costs of $130.00 and Solicitors fees of $500 were also imposed.

His Honour Judge Somerville noted that if a guilty plea had not been entered at an early stage, this was a case where a fine of $10,000 would have been appropriate.

Commission Chair John Belgrave said that there are two messages from this prosecution. First, the Commission's crack down on false claims made by car dealers is continuing and, secondly, for all advertisers, "free" must mean no extra costs.

Greymouth Car Centre had placed 14 advertisements in the Greymouth Evening Star last year. It offered used cars at "retail" and "wholesale" prices, and also offered a "free 2 year warranty unlimited kms". The retail prices were, depending on the car, up to $2,000 more than the wholesale prices.

Window cards on cars in the dealer's yard listed "cash" and "wholesale" prices and offered a "free 2 year unlimited K's warranty".

However, neither the advertisements nor the window cards stated that consumers would only get what was being promoted as a "free" warranty if they paid the higher price for that car.

Judge Somerville noted that the advertisements had the potential to lead to unwanted purchases of vehicles, and to lead consumers away from competitors.

"The warranty was clearly not 'free'," Mr Belgrave said. "Consumers could only get the warranty by paying more.

"Importantly for all advertisers, even if the advertising had disclosed the extra cost for the warranty it would still have been misleading and a breach of the Fair Trading Act to call it 'free'."

Mr Belgrave said that the Commission is deliberately focusing attention on car dealers. This was the fourth prosecution of a card dealer in the last few months.

"We will continue investigations and enforcement action until compliance improves."

Recent prosecutions for false or misleading claims by car dealers:

  • The Auckland District Court fined Enterprise Motor Group Limited and one of its subsidiaries a total of $33,000.
  • The Nelson District Court fined Haven Motors Limited $5,000.
  • The Christchurch District Court fined Landseer Investments Limited, which trades as Donnithorne Simms, $3,000.

    • Media contact: Fair Trading Manager Ross McPherson

    Phone work (04) 498 0909, cellphone 021 627 909