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Big loan for a bad car

In 2018 Lilly took out a $30000 loan to buy an imported car. A couple of months later, the lender repossessed Lilly’s car as it believed the car to be at risk. The car was sold for $4500. Lilly was left with $23000 owing on her loan and no car.

Lilly complained that the lender should never have lent her a loan of that size for an imported car that had no WOF or registration, and needed a number of repairs to make it roadworthy. Lilly also complained that the lender had failed to comply with the Responsible Lending Code when it repossessed her car without notice. Lilly disputed that her car was at risk. She also believed that the lender had sold the car below value, and that the car could instead have been repaired for $1,500.

The relationship between Lilly and the lender broke down and Lilly complained to FSCL.



The lender said that when it lent Lilly the money, it was under the impression that this was a straightforward loan and that the dealer had provided a full vehicle offer and sale agreement. The offer and sale agreement did not mention that the vehicle had any issues or needed any repairs.

The lender also said that Lilly had not provided it with any information on the real condition of the car. The lender had a practice of lending money for the purchase of imported cars that were not yet registered.

The lender claimed that the repossession had occurred because the lender had seen the car being driven by Lilly’s husband. The lender had then struggled to get in contact with Lilly and to locate the car. The lender believed the car to be at risk.

The lender also claimed that it sold the car quickly, and for a higher price than had been quoted.



We found that the lender had not breached its responsible lending obligations in providing the loan to Lilly. We did suggest that, in the future, the lender may wish to conduct a more thorough enquiry when offering loans on unregistered vehicles, purchased for personal use. However, we did not believe that the lender’s failure to discover the faults with the vehicle warranted a recommendation of compensation in this case.

We found the repossession was legal as the lender had sufficient reasons to believe that the vehicle was at risk. Due to this, the lender did not have to issue a notice of repossession.

We found that the sale price obtained for the vehicle was reasonable. The lender sold the car for $1000 more than the quote it was given on the value of the vehicle.



We found that the lender had acted reasonably in its decision to lend to Lilly, and to then repossess and sell the vehicle.

We did find that the lender should refund Lilly the retail insurance of $325. The car was not roadworthy, and therefore the insurance was not required or fit for purpose.

The lender was happy with this decision and offered to pay Lilly the $325 refund. Lilly was not very happy with this and did not take the settlement offer.


Insights for consumers

A lender is allowed to repossess its security without notice if it has reasonable grounds to believe that the vehicle is at risk of being sold, damaged or disposed of.