The Motor Dealers Act establishes a Motor Dealers Compensation Fund (the Fund) to provide protection to persons who have suffered a loss in connection with a motor vehicle through their dealings with a motor dealer or a car-market operator. The Fund is financed by licensing fees paid by dealers and car-market operators.

Claims are usually made on the Fund when a motor dealer ceases to trade, either on a voluntary basis or a forced closure. The types of claims made usually relate to:

• dealers failure to meet warranty obligations
• dealers failure to pass an unencumbered title
• stolen vehicles sold by a licensed dealer
• failure of a dealer to repay or return a deposit, for example, a deposit has been paid for the delivery of a motor vehicle, usually a new motor vehicle, which is to be delivered from the supplier but the vehicle is not delivered prior to closure
• failure to pass on monies to the customer when a vehicle is consigned to a dealer to be sold on the customers behalf.

Once a claim is paid through the Fund, Fair Trading instigates debt recovery action.