When looking to buy a car, if money's tight, taking a loan is a common option.
But what if you find yourself paying a loan you can’t afford?
That's the situation one Auckland mum of five found herself in, and her budget advisers, Christians Against Poverty (CAP), say she shouldn't have been approved for the loan in the first place.
Sarah's asked Fair Go to keep her identity private.
For her, debt is a difficult and embarrassing thing to talk about.
"It is quite scary because you know it's a never-ending debt that's probably not gonna go away," she says.
In 2021, Sarah purchased a car from Auto Mates Cars, a dealership in Manurewa, Auckland. She was approved for finance by Go Car Finance (GCF).
To help manage her debt Sarah then sought help from CAP, who question whether a proper affordability assessment was done before she signed on with GCF.
According to the CCCFA (Credit Contracts and Consumer Finance Act), checking whether you can afford the loan is one of the key responsibilities of a lender.
The total cost of Sarah's car was $18,625, that's including the price of the car — $15,000 — fees and insurance. On top of this, she was paying 25.95% interest per annum, over a four-year term, which was $10,000 on top of the vehicle price.
All up, Sarah owes more than $28,000, almost double the purchase price of the car.
Fair Go asked GCF if a proper affordability assessment was done.
"GCF (Go Car Finance) spends considerable time on every application for finance making enquiries to ensure the loan is affordable and the loan is suitable for the consumer's requirements and objectives," chief executive officer Paul Verhoeven said.
But in Sarah's case, GCF's checks weren't up to scratch — that's according to a preliminary decision by the Financial Services Complaints Ombudsman, a dispute resolution service.
"Go Car have not met their responsible lending obligations because they failed to take into consideration Sarah's reasonable accommodation expenses and her financial obligations as a single mother to her five dependants," Ombudsman Susan Taylor said in a preliminary decision.
"Go Car's mistake resulted in unaffordable lending that has caused her substantial hardship."
The Ombudsman also says that GCF should credit all interest and fees back to Sarah's loan account and pay compensation for any stress and inconvenience caused, totalling just over $8800.
GCF does have a chance to make further submissions before a final ruling is made.
Should immobilisers be banned?
Affording the loan isn't the only issue Sarah's facing.
Her car has an immobiliser installed in it. It's a device that Go Car Finance has in most of its cars to stop them from starting if clients miss payments, or if the car is stolen.
Sarah admits she's missed more than a few payments when times got tough. But in some cases, when the device is activated, Sarah has been left stranded.
"The worst one was when my car was being immobilised, and my daughter's at kindy.
"I'm on the phone waiting in our work car park, trying to get through to somebody to enable the car," she says.
Sarah says in one case, she was on hold for three hours and had to get her father to pick her up. Her car has been immobilised at least 10 times.
Verhoeven apologised for the time Sarah's had to wait and said there are times that GCF's call centre experiences higher than usual wait times.
According to Sarah's contract, to get the car started, the overdue amount must be paid, or a payment plan with Go Car Finance must be sorted.
But Verhoeven also says that every time Sarah called to have the device disabled, it would be turned off straight away.
For safety reasons, Go Car says they only disable a car when the engine is off and that there is an emergency override option available via text that starts the car straight away. Verhoeven says GCF manages these devices ethically.
"We do not disable a vehicle until we are satisfied that the customer is unresponsive, and disabling is very much a last resort".
In each case, Sarah's car was immobilised, GCF says they did give proper notice by sending a series of messages to Sarah. The immobiliser also emits a warning noise in the week leading up to the car being stopped.
But CAP think immobilisers shouldn't be used for debt collection at all, and is calling on the Government to ban the use of the devices in this way.
CAP's social policy adviser Michael Ward calls the use of these devices punitive and also dangerous.
"One of our clients was stuck after dark in a remote location with two toddlers and without cell phone reception and she had to abandon her car and walk for miles until she could get cell phone reception,“ he says.
Ward says families choose to repay their car loans at any expense, even if that means their kids go without food that week.
"Rather than immobilising their vehicle just to extract payment from them at any cost, we should be using that as an opportunity to engage with customers," he says.
"A responsible lender would ask the questions, what else is going on in the client's life that we might be able to help them with?"
Fair Go asked the Ministry of Business, Innovation and Employment (MBIE) if it was looking to ban the devices.
Consumer policy manager at MBIE Glen Hildreth told us: "MBIE is not looking at further regulating the use of immobilisers but would not rule out further consideration of this area if the existing laws are not adequately protecting consumers from unfair conduct".
*To be very clear - while Sarah’s car did have an immobiliser, the device shown in the story is an ETC or electronic toll card. Immobilisers are installed internally
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