Two-thirds of new car buyers have experienced problems with their vehicles in the first five years of use, with some struggling to use their legal rights to a repair, refund or replacement.
Nearly 70 per cent of Holden owners said they experienced problems with their new car within five years.
An "alarming" 15 per cent of car new car buyers were unable to resolve their problem, despite warranties, insurance and consumer guarantees to repair, refund or exchange the goods if a product is not of an acceptable quality.
"While some companies are doing the right thing, others are treating consumers' statutory rights as an optional extra," said Choice's chief executive, Alan Kirkland.
"The research findings convey the very real sense that car companies are off-loading sub-standard new cars on consumers and then using lawyers to fight consumers, forcing them to pay more to have their new cars fixed."
Choice also found 16 per cent of new car owners with problems were forced to sign a confidentiality agreement in order to obtain a remedy, banning them from telling anyone about their experience.
When it came to complaints, the findings showed Holden was the worst performing car company, with 68 per cent of Holden owners experiencing problems with their new car, followed by Ford and Audi.
Dealers and Manufacturers take warranty problems seriously and want to fix problems properly and quickly.
Greg Patten, chief executive of Motor Traders Association of NSW, which represents dealers, said the industry took warranty complaints very seriously and fixing problems properly and quickly was their "lifeblood".
He said in cases where there were confidentiality agreements, the consumer most likely had exhausted all options with manufacturers, fair trading agencies, lawyers, and were willing to sign an agreement.
"It would be worrying if consumers are immediately going to the dealer or manufacturer and signing a confidentiality agreement to get a warranty problem fixed, because that would mean all the advertising done about consumer rights has completely missed its mark."
While acknowledging the poor results, a Holden spokesman said it had improved customer service by proactively calling customers with multiple warranty cases, by being "very active" on social media, and by educating dealers.
"This is clearly an industry-wide area that requires attention and is often driven by the increasing complexity of modern vehicles and vehicle interaction with mobile devices," said Holden's Sean Poppitt.
"Non-disclosure agreements are certainly not standard practise for Holden for any warranty or product issue. In some individual cases where issues are raised outside of warranty, resolution agreements are documented for clarity.
Queensland pushes for national 'lemon laws'
The national consumer law is enforced by local authorities in each state and territory.
The Queensland Government has been holding an inquiry into defective cars and it has been pushing for stronger national laws.
These so-called "lemon laws" would force a car seller to offer a replacement after a limited number of failed repair attempts.
Consumer affairs ministers from all states and territories have agreed to a national review of the law later this year.
Motor Traders Association chief executive Greg Patten said he believed the existing law was fair, and gag orders were not as common as Choice claimed.
"The majority of the retailers, car dealers, salesmen, everyday ladies and gentlemen, what they want to do is make sure they build a relationship with every customer that comes in," he said. "It is a fairly fair piece of legislation.
"I think Government say that they think they've got it right when both parties complain about it. Certainly resellers have complained about the Australian Consumer Law being too stringent, and today some consumer representative bodies seem to comment that it's not as tight as it should be.
"So it's probably about where it should be, but of course it could need a review and a bit of retuning to make it better."