Despite the win Dealers recently achieved regarding commissions for add-on insurance, AADA wants members to be aware that the Consumer Action Law Centre (CALC) has begun a media campaign warning of ‘shonky selling’ of add-on insurance and extended warranties.
The campaign follows an enforceable undertaking to ASIC by Sydney firm Inhouse Finance Group, which has agreed to refund more than $400,000 to 177 consumers. ASIC surveillance found that the car financier charged consumers an interest rate higher than the maximum allowable under the National Credit Act.
Inhouse Finance Group provides loans for cars purchased from Best Buy Autos in Sydney. It required consumers to purchase a warranty product if they were unable to pay an 80 per cent deposit.
The cost of the warranty was included in the amount borrowed under the loan contract and this cost should have been included in the calculation of the annual percentage interest rate. The miscalculation led to some consumers being charged an annual interest rate of up to 90 per cent on their car loans when the maximum allowed by law is 48 per cent.
“Car yards should be ashamed by the sales tactics we’ve seen,” said Susan Quinn, Senior Policy Officer at CALC.
“We estimate that over $70 million in junk insurance and rubbish warranties is sold to Australians every year. High pressure sales, inappropriate products and ridiculous commissions seem to have been normalised in Australia’s car yards.
“This ASIC action barely scratches the surface of the behaviour we’ve seen in car yards. Cars are a really important purchase, but Dealers shouldn’t be relying on commissions from junk products to make a profit.”
Ms Quinn said that since launching DemandARefund.com in early 2016, CALC has helped Australians demand refunds for over $500,000 worth of “junk” insurance and “rubbish” warranties.
This is what they are saying about us
Consumer Action’s three tips for avoiding car yard shonks:
- Insurance and warranties sold in car yards are bad news.
Our experience shows that the insurance products and warranties sold at car yards is often poor value. The salesperson is more focused on their commission than getting the right insurance for you. Research your own options.
- Car yards are bad places for financial decisions.
It might seem convenient to buy your car and arrange a loan in the same place, but you could be stung with an expensive loan you can’t afford. Compare rates in the market and speak to a lender who cares about giving you the right loan for your circumstances.
- Prepare before entering the car yard.
Walk in prepared. Set your budget, know what car features are important for you and be prepared to sleep on it. Cars are a major financial decision – so don’t rush!
We are publishing this article in order to inform Dealers of what is being said about our industry so they can arm themselves against uninformed critics and ensure they themselves do not become the target of CALC.