Kiwi comedian Raybon Kan has won a dispute with a car dealer over the mechanical insurance on his BMW.

Kan is a member of Consumer NZ and the watchdog has issued a call to action for people who have been mis-sold mechanical breakdown insurance to demand a refund.

Kan was sold insurance by Palmerston North car dealer Lee European when he purchased a BMW 320i. The dealer claimed the policy would cover faults with Kan's vehicle's air-conditioning and transmission, which a pre-purchase inspection had indicated would need repair, however the tribunal said the dealer failed to provide a copy of the policy.

It also did not tell Kan the insurance excluded pre-existing faults and he would not be able to claim on it if the air conditioning or transmission problems turned into a major expense.


Kan took Lee European to the Motor Disputes Tribunal, which ordered the dealer to pay back $2000 for the insurance and $2200 for subsequent repairs.

Lee European director Jason Lee told the Herald that his company was no longer selling cars and was only servicing them.

Since the expansion of the Consumer Guarantees Act, Lee said dealers were being found liable for too many problems they could not predict would arise.

"A lot of insurance policies on the market will only cover a very limited level of claims and there's so many exclusions," Lee said.

"The issue we had there was the policy we'd activated for [Kan] wasn't what we expected ... the car had a fault which we weren't aware of. When they put a claim through the policy didn't cover it and therefore we had to write him out a cheque," he said.

Consumer NZ is now calling for all consumers who have been mis-sold mechanical breakdown insurance to demand a refund.

Consumer NZ chief executive Sue Chetwin said insurance was heavily promoted by car dealers, which often added more than $1000 to a vehicle sale but was not worth it.

Chetwin said complaints to Consumer NZ showed the pointless insurance was often sold with misleading claims about the protection it would provide.


"Dealers claim the insurance will protect you if vehicle parts suddenly fail and need repair. But the policies typically have long lists of problems that aren't covered, including any pre-existing faults with the car and anything deemed the result of faulty repairs," she said.

"If a car dealer sells a vehicle that's not of acceptable quality, it has a legal obligation to sort out the problem."

Vehicle buyers have protection under the Consumer Guarantees Act and do not need separate mechanical breakdown insurance, Chetwin said.

Consumer NZ is urging those who have purchased the insurance to seek a refund if they were told the insurance was compulsory, if the insurance was added to your car loan without your knowledge, if you never received a written copy of the policy or if you were misled about what the insurance policy covered.

Car dealers earn a commission on selling mechanical breakdown insurance so it was no surprise many pushed for the cover during sales pitches.

"In our view, this insurance isn't worth the cost," Chetwin said.

"You're better off spending your money on a pre-purchase inspection and getting the vehicle regularly serviced after you buy."