That was a 2007 Toyota with over 115,000km on the clock. The man agreed to purchase the vehicle sight unseen.
“When Jimmy arrived at the car yard in Hamilton to collect the car, he inspected it, was given the finance documentation and the car keys, then sent on his way by the salesman.”
Styles said the car had a sale price of $13,000, but by the time the high-interest rate and a heap of “optional” extras were added on, the total cost for the loan amounted to almost $30,000.
“A Trade Me car valuation tool estimated the car’s value was around $7000.”
Styles said Jimmy was also charged for a device which allowed the finance company to deactivate the engine if he missed a payment.
Jimmy’s boss, a qualified accountant, helped him terminate the contract within the five-working day cooling-off period which borrowers have under the Credit Contracts and Consumer Finance Act (CCCFA).
“The car yard didn’t tell Jimmy about the cooling-off period, so he was lucky his boss was able to provide him with sound advice,” Styles added.
She said under the CCCFA lenders must exercise the care, skill and diligence of a responsible lender.
“This includes making sure the loan is both suitable and affordable.”
Consumer NZ said the add-ons Jimmy was sold included mechanical breakdown insurance, a restart waiver, and a maintenance package.
“Jimmy doesn’t recall discussing these add-ons or agreeing to purchase them.”
Consumer NZ said the Commerce Commission in the past two years had received 53 enquiries about Go Car Finance and opened an investigation into Go Car Finance in 2021.
The consumer group said financial mentors and social agencies had complained about “systematic irresponsible lending”.
“Too often we’ve heard of issues involving this lender concluding with a whānau having no car to show for a huge debt,” FinCap chief executive Ruth Smithers said.
“It makes it even harder for them to keep food on the table.”
Go Car Finance has been approached for comment.
The finance company’s website said some people found it better to take a car loan instead of using up cash savings.
“At Go Car Finance, we don’t just provide you with a quote but a complete ownership package with car insurance, maintenance and more, so you can calculate your regular car payments and set your budget accordingly.”
Consumer NZ said it supported The Salvation Army, FinCap and Christians Against Poverty (CAP) in their call for an investigation into the car finance sector.
Consumer called for a ban on car dealers deciding on the interest rate for finance deals.
It also advocated setting limits on the amount of commission a car dealer can earn from selling add-on insurance products.
And it said reforms should include stopping payment for add-on insurance products being rolled into the finance deal.
Immobiliser devices should also be banned, Consumer NZ added.
And it said the amount of interest that could be charged on loans should be reduced from the current cap of 0.8 per cent per day.