The Worst Car Loan Ever?

Hi Scott,

My nephew borrowed $51,681 from ‘Infinity Finance’ for a car at 18.35% interest. After 12 months of paying $1,327 monthly (that’s nearly $16,000 paid), he came into some money and asked for an early payout figure. They said he owes $53,511 – that’s nearly $2,000 MORE than he originally borrowed. They’ve given him seven days to ‘take it or leave it’. Is there any world in which this is legal? What do we do?

Aunty Pat

Hi Aunty Pat,

Your nephew has just learned the most expensive lesson an 18-year-old can learn:

Don’t swim with sharks.

Let’s look at the maths:

He borrowed $51,681.

He’s already paid almost $16,000.

And after a full year of repayments … they say he still owes $53,511?

Bloody hell.

Now, how does that happen?

Simple. These lenders pile on things like early termination fees, establishment fees, monthly account fees, and interest that compounds faster than rabbits. It’s all buried in the fine print.

If he keeps the loan, he’ll end up paying close to $70,000 for a car that’s probably worth $35,000 today. Half his money. Incinerated.

So here’s what you should do:

Tell him to prepare himself for a bit of biffo.

He’s about to scrap with a company whose entire business model depends on 18-year-olds not reading the fine print. So he should call the National Debt Helpline on 1800 007 007 and get a free financial counsellor in his corner.

His first punch is to call Infinity Finance and tell them he’s disputing the loan on responsible lending grounds. An 18-year-old, fifty grand, 18 percent?! That’s got ‘Barefoot Investor national newspaper article’ written all over it.

Then throw a hook: while he’s got them on the phone, make them a ‘full and final’ settlement offer well below their payout figure. I’d open at $45,000.

However, I’m guessing these guys don’t mind a scrap and they love their money, so they may well say “bring it on”. If they do, it’s time to go for his knockout punch: lodge a complaint with AFCA (the Australian Financial Complaints Authority). The moment he does, Infinity Finance has to stop any debt collection action. They can’t chase him. They can’t threaten him. They just have to sit there and wait.

Oh, and tell your nephew one more thing from me:

When someone offers a teenager a $50,000 car loan at 18% interest, they’re not selling a car.

They’re selling a life lesson.

Unfortunately, this one costs about $35,000.