The peak body representing Australia’s finance brokers has warned car buyers to proceed with caution when considering financing their vehicle through motor dealerships, particularly when cheap interest rates are offered.
The Finance Brokers Association of Australia (FBAA) says their members have reported examples of dealers financing cars that customers cannot afford, leaving them thousands of dollars out of pocket.
FBAA chief executive officer Peter White said the practice appears not to be limited to small dealerships, but also involves large franchise motor dealers.
“It seems many dealerships misunderstand the lending requirements under the National Consumer Credit Protection Act (NCCP) and believe they are exempt from all of the Act’s requirements, which they are not,” he explained.
“They are taking advantage of a grey area of the act by not abiding by responsible lending obligations, and often they have unqualified people writing the loans.”
The association’s warning comes following an infringement notice being issued against a Sydney car dealer by ASIC, which found “reasonable grounds” that the dealer had contravened provisions of the NCCP.
“Motor dealers may not be providing customers with a credit guide, not disclosing commissions and we have seen some clear examples of them not meeting responsible lending conduct obligations,” Mr White revealed.
He warned that “zero per cent finance is not a good deal” because customers are “paying over odds for a car which will be worth less than their loan in two years’ time.”
“A percentage of dealers are doing the right thing, but many others either don’t understand their obligations or are intentionally not abiding by the rules,” he said.
While the FBAA is working with regulators to clarify the Act and to bring motor dealers under the NCCP, Mr White said the best advice he could give to people thinking of financing a vehicle through a motor dealer is to ask questions.
“Ask if the person writing the finance is a member of a professional finance association like the FBAA. Ask what qualifications they have to provide finance advice.”
For more information go to www.fbaa.com.au