20th April, 2022 ยท bulletin

Splitting Car Purchasing Payments with
BNPL Providers

2 minutes to read

Consumer advocacy group Choice has called attention to car financing lending practices where part of the purchase price of a car is split from the overall price and put on to a Buy Now Pay Later (BNPL) scheme. Choice claims that this practice is being used by car dealerships as a workaround to the safe lending laws and gives examples of the practice being used when customers fail to qualify for credit on the full purchase price of the vehicle. Choice does not define what it considers a “car dealership” to be, so it is unclear if they are referring to franchised new car Dealers, used car yards or both.

Choice is calling for a review of BNPL lending services and for consumer safeguards to be implemented and has cited this practice of split payments for car purchasing as an example of lending activity that can lead to consumer detriment.

The AADA has received feedback from several members which indicate that this practice is not something they engage in and is not commonplace among franchised new car Dealers. The inference by Choice is potentially harmful to the reputation of Dealers and their relationships with customers and their franchisors.

The AADA secretariat is currently seeking a meeting with Choice to better understand the extent of the issue and to analyse the Choice data to assess the level of involvement of franchised Dealers. While we have no formal policy on the need for greater consumer safeguards to be built in to BNPL products, as an industry we have worked constructively and extensively with ASIC and other regulators on the introduction of safe lending practices that ensure consumers are appropriately protected. In our view, further regulatory intervention in our industry is unwarranted in the absence of strong, granular evidence which demonstrates a need for it, and we intend to clarify our position with ASIC at the earliest opportunity.