You know when you read an article in the business pages of a well known news editorial saying how many vehicles a car manufacture has sold? Then stop for a moment and realise how these figures are possibly manipulated. Take BMW Australia for example, the companies finance division happily issued loans to people with negative disposable incomes.
That means BMW dealerships in Australia were handing out cars to people who simply could not afford to repay the loans.
The main reason why this occurred was purely based on the bonus culture greed, the more cars you sell as a dealer sales executive the more bonuses you are guaranteed.
A report compiled by an external auditing company in Australia found that many dealers were happy to accept false loan documents.
The report found that BMW Australia Finance approved a $23,000 AUD loan to a 21 year old refugee who was only in employment for one month and who had grossly overstated his income.
In another case BMW Australia Finance approved a $27,000 AUD loan to a single mother of 10 children who was in part time employment.
BMW even offered a $50,000 AUD loan to a 76 year old man based on his projected earnings rather than actual income. The loan was worth twice the value of the car.
The review into BMW Australia Finance was requested by The Australian Securities and Investments Commission, a government regulator of corporate practices, and was undertaken by Ernst & Young.
According to the review,“BMW [Australia Finance] has not demonstrated a satisfactory level of organisational competency necessary to engage in credit activities efficiently, honestly and fairly,”
BMW have breached Australian corporate sales practices before and were recently fined $697,000 by the Australian Securities and Investments Commission.
That didn’t stop BMW sales executives from continuing to issue loans and boosting interest rates in order to boost their personal commissions.
For example under a dealer incentive scheme a BMW sales executive would receive $375 AUD commission based on an interest rate of 5.75 percent.
However after a few months the dealers would boost the base interest rate to 12.29 percent thereby boosting their sales commission to £8163 AUD.
The review by Ernst & Young found most of the loans approved were worth more than the value of the car.
In one particular case a mail courier stated that he earned $53,000 AUD per month and had his loan approved.
BMW released a response to the leaked report stating it is “fully committed to implementing a business model which reflects the industry’s best practice compliance, business processes and customer service.”
The evidence is clear, BMW did everything to avoid following the loan industry’s best practice.