Don’t just take our word for it! In August last year car company BMW’s finance arm – wholly owned by the car company itself – was found to have breached many of the rules in the consumer credit code.
In what amounted to a litany of failings, a review by Ernst & Young found that BMW (Australia Finance) had, among other things…
1) Paid much larger bonuses to their sales staff if they were able to secure a loan to a customer at a higher interest rate. In some cases the dealership could increase its commission by over $7,000 simply by getting the customer on to a loan deal with a higher interest rate.
2) Offered finance to customers even when their personal financial information was patently incorrect, for example where earnings were (sometimes vastly) inflated or where living expenses were declared at very low levels.
3) Offered loans in excess of the car’s value, meaning that the customer would still owe BMW money even after selling the car.
The end result of the review was that ASIC fined the company $697,000 and late last year ordered it to repay customers $77 million for ‘violating responsible lending provisions’.
So the moral of the story is… it’s wise to wary of the various ways in which car dealers can make you part with more money than you should when buying a new car.
So, our advice is as follows…
1) Make sure you know what your options are before you go into the dealership. Have a look at prices offered at different dealerships and check into other finance options (give us a call!). Also get an idea of what the resale value of your current car might be if you are thinking of trading it in against the new one.
2) Don’t get drawn into the excitement of the process of buying the new car. Good salespeople can take advantage of the excitement and rush things through when you should be carefully considering the offer. On no account be persuaded by the salesperson saying that the deal offered is only available ‘on the day’.
3) Have a loan pre-approved before you go into the dealership. You can show this to the salesperson to show that you are not just ‘tyrekicking’. Plus it gives you a benchmark to see whether the finance deal the dealership is offering is any good.
4) Watch out for add-on sales after the purchase – these can often be at vastly inflated prices compared to what you can get outside the dealership.
Finally… as a general rule it’s a good idea to look at the deal as a whole. Where a car dealership is offering you a very good price, make sure that they’re not making up for it with a lowball valuation of your trade-in or by jacking up the interest rate on the finance. Conversely you may be offered a very low (or even zero) interest rate, but then you will probably be paying the full retail price for the new car.
And finally… give Ezilend a call before you go car shopping – it could save you a lot of money!
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