The Consumer Guarantees Act and Motor Traders: Your Legal Obligations in 2026

The Consumer Guarantees Act 2003 (CGA) is one of the most important pieces of legislation for NZ motor traders. It gives buyers of vehicles and recipients of repair services strong rights — and places clear obligations on anyone operating commercially in the motor trade. Understanding the CGA is not just a legal requirement; it's essential for managing your insurance exposure.

What the CGA Requires of Motor Traders

The CGA applies whenever a motor trader supplies goods (vehicles, parts) or services (repairs, diagnostics) to a consumer (a non-business buyer). The key guarantees for motor traders are:

For vehicle sales:

The vehicle must be of "acceptable quality" — safe, durable, free from minor defects, fit for purpose

The vehicle must match its description

The vehicle must be fit for any particular purpose communicated to the dealer before sale

You must have clear title to the vehicle

For repair and service work:

Services must be carried out with "reasonable care and skill"

Services must be completed within a reasonable time

If a price wasn't agreed in advance, the charge must be reasonable

What "Acceptable Quality" Means in Practice

"Acceptable quality" is the CGA standard that creates the most disputes in the NZ motor trade. For a used vehicle, this means the vehicle must be:

Safe to drive in its current state

Free from defects that a reasonable consumer wouldn't accept if told about them

Durable — will it last a reasonable time given its age, price and condition?

Fit for the purpose it's sold for (e.g., towing, off-road use if represented as such)

A vehicle that breaks down within weeks of sale due to a pre-existing fault is likely to fail the CGA acceptable quality test — even if sold "as is" and even if inspected by the buyer. Exclusion notices ("sold as is") cannot override CGA rights in NZ.

The "Reasonable Care and Skill" Standard for Repairs

For repair workshops, the key CGA obligation is that services must be carried out with "reasonable care and skill." This means:

Work must be competent — errors and oversights that a skilled technician would not make are CGA failures

The correct diagnosis is expected — a mechanic who misses an obvious fault may be in breach

Work must address what it purported to address — if a brake job doesn't fix the brakes, that's a CGA failure

The standard is objective: what would a reasonable, competent technician do? This is assessed at the Motor Vehicle Disputes Tribunal (and the expanded Disputes Tribunal jurisdiction since January 2026, which can now hear claims up to $30,000 without legal representation).

How CGA Claims Are Made

When a consumer believes a motor trader has breached the CGA, they can:

1. Raise it directly with the trader — requesting repair, replacement or refund

2. Go to the Motor Vehicle Disputes Tribunal — for vehicle sale disputes

3. Go to the Disputes Tribunal — for general service disputes (up to $30,000 from January 2026)

4. Take court action — for larger claims

The Disputes Tribunal is fast, cheap and consumer-friendly. It does not require legal representation, and consumers know this. This has significantly increased the volume of CGA claims in the motor trade sector.

The Insurance Implications of the CGA

The CGA creates direct financial exposure for motor traders. This is why professional indemnity insurance is essential:

Professional indemnity covers:

Legal costs defending a Disputes Tribunal hearing

Any ordered payment — refunds, repair costs, loss of use

Expert witness fees if required

Settlement negotiations

Product liability covers:

Claims that a vehicle you sold was defective and caused damage or injury

CGA claims arising from parts you supplied

Without professional indemnity, every CGA claim you face is a direct out-of-pocket expense. Given the Tribunal's low barrier to entry, uninsured traders face frequent, disruptive claims.

Best Practices to Manage CGA Risk

Document everything: Written quotes, inspection reports, repair notes, and customer communications are your evidence if a CGA claim arises.

Be honest about vehicle condition: The CGA cannot be contracted out of. Misrepresentation doesn't just risk a claim — it can trigger Fair Trading Act exposure too.

Test your work before returning vehicles: A final road test and systems check before customer collection catches most faults before they become claims.

Set expectations around warranties: Be clear about what warranty (if any) you offer. Some dealers offer 30 or 90-day warranties which, if properly documented, can manage CGA expectations.

Respond promptly to complaints: A quick, professional response to a complaint often prevents Tribunal proceedings. Document your response.

For more information on how professional indemnity insurance protects motor traders from CGA claims, contact our specialist team.