Australia flags excessive car finance fees in eight-lender review

One customer paid $6,222 in fees on top of typical lender and distributor fees.

The Australia Securities and Investments Commission (ASIC) flagged concerns against car finance providers, including inconsistent loan costs and inconsistent hardship support.

In examining data from 350,000 loans across eight car finance providers, ASIC found that one lender imposed a third fee on top of the typical lender establishment fee and distributor establishment fee.

This third fee saw a customer pay $6,222 (A$9,000) in fees for a $33,988 (A$49,162) car loan, of which $5,461 (A$7,900) went to the lender and $912 (A$1,320) went to the broker, ASIC said.

Lender establishment fees range from $206 to $660 (A$299 to A$995), whilst distributor establishment fees range from a flat $630 to $1,728 (A$912 up to A$2,500).

ASIC said that some consumers received inconsistent hardship support. Some have cars re-possessed and sold whilst still owing their lender money.

“Consumers shouldn’t lose their car and still be stuck with the bulk of their debt,” said ASIC Commissioner Alan Kirkland.

ASIC found that lenders approve a lower proportion of hardship variations in regional and remote locations than in other locations.

“If a large proportion of customers are falling behind on repayments early, it raises serious questions about whether those loans were appropriate in the first place and how lenders conduct their affordability checks,” Kirkland said.

Lenders involved in ASIC’s review are Australian Alliance Automotive Finance Pty Ltd, Angle Auto Finance Pty Ltd, Latitude Automotive Financial Services, Nissan Financial Services Australia Pty Ltd, Pepper Asset Finance Pty Ltd, Plenti Finance Pty Ltd, Rapid Loans Pty Ltd, and Toyota Finance Australia Limited.