ASIC's current review of Australia's motor vehicle finance sector has exposed cracks in some lenders' oversight of car finance distributors-revealing problematic sales tactics, and a lack of regular audits and checks by lenders.
ASIC's review follows a spike in complaints about motor vehicle finance to the regulator, as well as reports from consumer advocates about excessive establishment and interest costs as part of various car finance arrangements.
Most lenders examined by ASIC rely on intermediaries, such as brokers and dealerships, to arrange motor vehicle finance, with ASIC uncovering significant variations in loan establishment costs.
'We saw instances of loan establishment fees as high as $9,000 on a loan of $49,000,' ASIC Commissioner Alan Kirkland said.
'We also found that almost half of all consumers who defaulted on their car finance repayments did so within the first six months of the loan. And of vehicles that were repossessed and sold, nearly 90% of consumers still owed more than half of their original loan amount.
'These numbers raise questions about whether these consumers have been given loans they cannot afford to repay, which is consistent with key themes in complaints that led to this review.'
ASIC will continue its probe to understand why such considerable cost differences exist and separately why many customers cannot keep up with repayments in the first year of their loan term.
The initial phase of this review examined every stage of a customer's journey, from finance application, loan assessment and responsible lending checks to hardship requests, support, and dispute resolution. It highlighted the impact of unaffordable loans on customers and how this is resulting in poor consumer outcomes.
In response, ASIC has issued tailored action letters to participating lenders based on our preliminary findings, with specific recommendations for each. The range of identified areas for improvement include:
- Better training, accreditation processes and oversight of lenders' finance distribution channels
- Stronger product review triggers and risk frameworks using consumer harm indicators and available data, including internal and external dispute resolution data to ensure products reach the right target market
- Improved communication when financial hardship arrangements are in place (in line with ASIC's recent hardship report), including better information on voluntary surrender options
- Enhanced governance frameworks to ensure adequate oversight of intermediary brokers and dealers.
Detailed findings from ASIC's review will be released in 2026 and will include information on how lenders have responded to ASIC's recommendations.
Mr Kirkland said, 'We've identified areas where lenders must lift their standards, or risk leaving consumers exposed to poor financial outcomes.
'ASIC will take enforcement action to protect consumers where appropriate.'
ASIC currently has proceedings against car dealership Diamond Wheels, Keo Automotive and a former director for allegedly providing car loans to consumers while unlicensed, with many of those consumers having paid an excessive interest rate (24-209MR).
ASIC also took action against Money3 Loans following numerous complaints, including from consumer advocates, about the inappropriate provision of finance to vulnerable consumers. While the court recently ruled largely in Money3's favour, some limited contraventions of the responsible lending provisions of the Credit Act were found (25-198MR).
Background
This review takes a broad look at the motor vehicle finance sector, noting that misconduct in used car finance sold to vulnerable consumers remains a key enforcement priority for ASIC in 2025.
The project aims to drive real change across industry, reducing consumer harm and improving outcomes for all car finance customers, including those in regional and remote areas and First Nations communities.
The project aims to drive real change across industry, reducing consumer harm and improving outcomes for all car finance customers, including those in regional and remote areas and First Nations communities.
Lenders involved in the review:
- 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 (including PowerTorque Finance).
More information
- ASIC puts car finance under the microscope including outcomes for regional and First Nations consumers - 19 March 2025
- ASIC's latest reports on financial hardship and design and distribution obligations.
For consumers
- Consumers who are looking for car loan help can find free resources on ASIC's Moneysmart website.
