CARMAKERS say full refunds on lemon cars are an "unfair windfall gain" for motorists and want them gone.

The nation's top consumer cop says that shows how out of touch the auto industry is.

Major brands are also agitating for the axing of the money-back guarantee that applies when it can be shown a car - or any other good - would not "have been acquired by a reasonable consumer fully acquainted with the nature and extent" of a failure that emerged later.

Lobbying for these changes is being led by the Federal Chamber of Automotive Industries, which has gone so far as to suggest some refund claims are made up.

In a submission to the Australian Competition and Consumer Commission's probe of new car retailing, the FCAI said its members had noticed a "spike in the number of consumers seeking a refund" when the final finance payment - often a large lump sum - falls due.

The FCAI repeatedly refused to provide further explanation to News Corp Australia.

In a submission to Consumer Affairs ANZ's consumer law review, the FCAI says a major failure of a consumer guarantee can trigger a full refund even though the consumer "might have had the use of the vehicle, sometimes for an extended period of time. This is an unfair windfall gain.

"If the consumer is entitled to a 'refund', an appropriate allowance should be made to take into account the consumer's use of the vehicle."

ACCC chairman Rod Sims
ACCC chairman Rod Sims

ACCC chairman Rod Sims said: "I haven't heard that argument being made for a defective fridge or TV. I think it just reflects this industry is not much attuned to the consumer guarantees in Australian consumer law."

Mr Sims said his view also applied to the FCAI's submission on the "if I knew then what I know now" test.

"That's a crucial test," Mr Sims said.

ACCC chair Rod Sims said the auto industry is out of step with Australian consumer law. Picture: Simone Smith
As car companies bid to wind back protections, consumer groups are seeking to increase them.

The Consumer Action Law Centre supports a specific protection against "lemons".

And Choice says buyers need additional help when arguing that ongoing minor defects - if unresolved within a reasonable time - can amount to a major failure and hence a refund.

The FCAI says there is "no reason" why a consumer should be able to reject a car in those circumstances if they get a loan car and do not "suffer any significant loss while their vehicle is being repaired".

Bad and Cassandra Aldcroft with their kids Owen, 3, and Emma, 5, with their troublesome Hyundai. Picture: Annette Dew
Bad and Cassandra Aldcroft with their kids Owen, 3, and Emma, 5, with their troublesome Hyundai. Picture: Annette Dew

In the middle of such debates are families including the Aldcrofts. The engine of their Hyundai ix35 cut out at least sixteen times over 13 months to January this year. The fault couldn't be repaired.

Only this week, following intervention by News Corp Australia, was the family given their legal right to choose a refund or replacement.

Hyundai declined to comment.