UK State pension only - Problems getting car finance?

[Lanky Lad]

I  made a similar post in.... looking like the  wrong place   ( hope   its OK mods??)

Seems as a result of a Royal Commission  on  banks /finance and loan companies and  allowing loans beyond the  means of the recipient to keep up the payments - that an income baseline was set and any UK expat in aussie with only the  UK State Pension and especially if it was maybe granted 10/15 years ago ... can have issues getting a car loan and run fact any loans.

OK to keep on topic...its only  experience from UK pensioners I am looking for... however for those  that don't  grasp that  these "new" condition affect all and any loans supplier on any type of purchase,   I accept these are  more often " unsecured"  loans and banks and some  other finance shops can offer secured loans -  using  mainly  your  home if you  own it.  

I am  more concerned in attitudes from  car dealerships and  car finance.

It seems the  income baseline has been set around the minimum allowance  for  the Aussie State Pension, which  unlike the UK state pension - can be amended and or withdrawn.  It seems that cardinalships et al,  are under the impression that the UK state pension  is the  same - which ( so far) is not so. 

So any UK state pension only funded having  or had  this problem??

[Marisawright]

You say the "income baseline" has been set around the minimum allowance for the Aussie State Pension, but I've been doing my research and i can find no evidence for that whatsoever. Happy to be proved wrong, but I can't find any sign that the government has set any kind of minimum income at all.  

I think the dealers may be telling you white lies - much easier to blame the government rather than blame their own finance companies.  

The thing is, if the criteria is set by the car finance companies, then each company makes their own decisions and others may have different rules - so it's worth checking.

And by the way, in Australia it's not true to say that a car loan is always secured against your house. It can be secured against the car itself.

https://www.finder.com.au/car-loans-for-pensioners

There is a government Pension Loans Scheme for people who are of retirement age but don't get the full Australian Age Pension, so you may want to look at that:

https://www.humanservices.gov.au/individuals/services/centrelink/pension-loans-scheme/eligibility-payment-rates

Edited September 26, 2018 by Marisawright

[Lanky Lad]

14 hours ago, Marisawright said:

You say the "income baseline" has been set around the minimum allowance for the Aussie State Pension, but I've been doing my research and i can find no evidence for that whatsoever. Happy to be proved wrong, but I can't find any sign that the government has set any kind of minimum income at all.  

REPEATING WHAT THE CAR DEALERSHIP  FINANCE GUY TOLD US.

I think the dealers may be telling you white lies - much easier to blame the government rather than blame their own finance companies.    I AGREE 

The thing is, if the criteria is set by the car finance companies, then each company makes their own decisions and others may have different rules - so it's worth checking.

IN OUR CONVERSATION, THE FINANCE GUY INTIMATED THAT  - "ALL THESE ISSUES ARE DUE TO THE ROYAL COMMISSION  ON BANKING PRACTICES , EARLIER THIS YEAR".

And by the way, in Australia it's not true to say that a car loan is always secured against your house. It can be secured against the car itself.

WE HAVE NOT ASKED  A BANK -  I THINK THEY ARE TO EAGER IF A LOANEE  HAS A SUDDEN PROBLEM... TO FORECLOSE AND START PROCEEDINGS - THIS  IS BASED ON WHAT I KNEW IN  THE UK, AND I  WOULD TRUST AUSSIE  BANKS LESS!    FINACE HOUSES - I GATHER -  HOLD  THE CAR TITLE TO FINAL PAYMENT.  

https://www.finder.com.au/car-loans-for-pensioners

There is a government Pension Loans Scheme for people who are of retirement age but don't get the full Australian Age Pension, so you may want to look at that:

https://www.humanservices.gov.au/individuals/services/centrelink/pension-loans-scheme/eligibility-payment-rates

Hi,

I have added comments to your post about - in BOLD !

As the post title indicates, I am looking to find out if I am the only pensioner in aussie who had recently had this "block! mentioned re car finance from a Ford and a KIA dealership - which seems to indicate that  there is in fact some new legislation involved.

I am aware of all the other options and in fact  The Credit Union seems a realistic option, they too hold the car title till final payment - which is not a problem.

Knowing that  the UK pension does not change from the rate it was set at on the day you leave the UK _  this post - as was the other - was aimed at getting details from  any who  may have  - in the past few months - had this applied to  them.

I cannot understand  how car dealerships - appear to be  turning away sales because of - allegedly -  a baseline of income that assess your ability to afford a loan after household bills, food and  other essential's are taken from  that income.  Also, logically if it is indeed a government "regulation" - then it would also apply to all  and  any  supplier of loans including banks!

[Marisawright]

It’s not a government regulation. All the institutions have tightened their lending criteria due to

[Marisawright]

Oops, sorry about that, computer problems.

I have done further research and there is definitely no government regulation.  It is possible the government will take some action, but the Royal Commission hasn't handed down its recommendations yet. So your dealer guy has no idea what he's talking about.

The benchmark he's referring to is called the HEM (Household Expenditure Measure).  There is no law that says banks have to use it.  The Commonwealth Bank decided to adopt it in 2012 (essentially as an "efficiency" measure - i.e  to save time and hang the customer) and gradually, all the other banks, and some (but not all) other lenders, followed suit.

Here is an article that explains it:

https://www.homeloanexperts.com.au/mortgage-calculators/living-expenses-calculator/

The most relevant sentence in that article is this:

"When lenders ask you to estimate your living expenses, they take the higher of the HEM or your declared expenses."

At the Royal Commission (as I'm sure you know), there have been repeated scandals about banks lending to people who can't afford it, and therefore many lenders are running scared and tightening their lending criteria - but the government has not given them any specific instructions.  Each lender has made their own decision.  It sounds as though the dealer finance company has decided to adopt HEM. 

So, the refusal has nothing to do with you being on a British pension, any Australian with the same income and expenses, from whatever source, would be in the same boat. 

The question is whether you can find a lender who is not using HEM (it's not compulsory).  

Ironically, it's likely the Royal Commission will ban the use of the HEM because for most working people, it under-estimates their real expenditure, and therefore it's part of the problem, not a solution!

By the way, you seemed to imply that your situation, i.e. owning your property outright and living on a pension, was unusual in Australia.  Certainly, living on a British pension is unusual (and it's scandalous that the British government freezes the pension), but there are many thousands of Australian pensioners who are "asset rich, cash poor".   In Sydney and Melbourne, it's extremely common for someone in old age to be sitting in a fully-paid-off home.  It's why reverse mortgages are growing in popularity in spite of their downsides.

 

Edited September 28, 2018 by Marisawright

[Lanky Lad]

22 hours ago, Marisawright said:

Oops, sorry about that, computer problems.

I have done further research and there is definitely no government regulation.  It is possible the government will take some action, but the Royal Commission hasn't handed down its recommendations yet. So your dealer guy has no idea what he's talking about.

The benchmark he's referring to is called the HEM (Household Expenditure Measure).  There is no law that says banks have to use it.  The Commonwealth Bank decided to adopt it in 2012 (essentially as an "efficiency" measure - i.e  to save time and hang the customer) and gradually, all the other banks, and some (but not all) other lenders, followed suit.

Here is an article that explains it:

https://www.homeloanexperts.com.au/mortgage-calculators/living-expenses-calculator/

The most relevant sentence in that article is this:

"When lenders ask you to estimate your living expenses, they take the higher of the HEM or your declared expenses."

At the Royal Commission (as I'm sure you know), there have been repeated scandals about banks lending to people who can't afford it, and therefore many lenders are running scared and tightening their lending criteria - but the government has not given them any specific instructions.  Each lender has made their own decision.  It sounds as though the dealer finance company has decided to adopt HEM. 

So, the refusal has nothing to do with you being on a British pension, any Australian with the same income and expenses, from whatever source, would be in the same boat. 

The question is whether you can find a lender who is not using HEM (it's not compulsory).  

Ironically, it's likely the Royal Commission will ban the use of the HEM because for most working people, it under-estimates their real expenditure, and therefore it's part of the problem, not a solution!

By the way, you seemed to imply that your situation, i.e. owning your property outright and living on a pension, was unusual in Australia.  Certainly, living on a British pension is unusual (and it's scandalous that the British government freezes the pension), but there are many thousands of Australian pensioners who are "asset rich, cash poor".   In Sydney and Melbourne, it's extremely common for someone in old age to be sitting in a fully-paid-off home.  It's why reverse mortgages are growing in popularity in spite of their downsides.

 

Hi, Sorry for delay - been busy giant killing!   The  other problem with the big finance companies - call centre type "customer services" - they all seem to have scripts and  no brains!

Using that living expense calculator - is not really helpful -   Limited options which don't  allow a real "picture", i.e.    RENT or MORTGAGE??    We  have none - we own the  house and land outright - paid cash 10 years ago!   $462  living expenses??  we  don't buy alcohol - eat pre packed frozen meals -  have a fridge in the garage full of beer and we don't eat  junk foods!   
The dealership and  Toyota Finance have not replied telling  us why we have all this crap having paid off our last car loan in  half the time   by doubling their stipulated monthly payment.   

[Marisawright]

40 minutes ago, Lanky Lad said:

Hi, Sorry for delay - been busy giant killing!   The  other problem with the big finance companies - call centre type "customer services" - they all seem to have scripts and  no brains!

Using that living expense calculator - is not really helpful

I wasn't suggesting you should use that calculator.  I'm referencing the article. It explains that IF you are dealing with a finance company that has a policy of using "HEM" (Household Expenditure Measure), they will compare your actual expenditure against the HEM and they will use the HIGHER of the two.  Unreasonable, but that is how they work and it's non-negotiable.

As you point out, the HEM is always going to be higher because you have no mortgage/rent.  Therefore any lender which uses HEM won't lend to you. That is the explanation and no, of course call centre drones don't know how it works.

The question is whether you can find any sensible lenders out there who have not adopted the lazy HEM method.

 

Edited September 29, 2018 by Marisawright

[Lanky Lad]

2 hours ago, Marisawright said:

I wasn't suggesting you should use that calculator.  I'm referencing the article. It explains that IF you are dealing with a finance company that has a policy of using "HEM" (Household Expenditure Measure), they will compare your actual expenditure against the HEM and they will use the HIGHER of the two.  Unreasonable, but that is how they work and it's non-negotiable.

As you point out, the HEM is always going to be higher because you have no mortgage/rent.  Therefore any lender which uses HEM won't lend to you. That is the explanation and no, of course call centre drones don't know how it works.

The question is whether you can find any sensible lenders out there who have not adopted the lazy HEM method.

 

I used the calculator as you suggested - to get an idea on  what the look for....but the calculator asks about rent or mortgage - which assumes  the applicant must have one or 'tother.   We don't!  Got nowhere with Toyota Finance... call centre type "customer services"  got into a loop with emails.. they say the cannot  assess until an application is  submitted... I reply that the dealership  have decided  that even though we paid  our last car loan off 3 years early.... they "assume" our income would not allow Toyota to  offer a loan!   Toyota in turn ignore that remark - so far three times... and offer nothing else!   The dealership  will not accept bank statements as proof of  ongoing UK pension  monthly payments!   They want a letter from the UK tax office... and look  blank when I say that would  probably entail a 2 month  wait as they decide which  department deals with expats!   AND anything over 90 days is not regarded as "current proof".  

At this point its not about getting a car loan - which our bank is  happy to handle -  its about getting answers. However it seems to revolve around basic aussie ways of living  and paying bills.. and the  mention the  word pensioner - and its automatically assumed the  pension  comes from Centrelink and can be lowered or stopped.   They don't understand - or even try to understand  that a UK pension is paid for life - albeit  that expat in Aussie, Africa and Canada - don't  get updates as they  arise in the UK.

The "argument" seems to centre not on the amount of income - but where it is derived and can be proved. Centrelink  don't handle  the UK pension apart from  wanting to record them - Aussies seem to think we can walk into a pensions office and   walk out with a bit of paper!   Centrelink may have its many faults - but they can  - for aussies -  do a pension  history statement  basically on request.

 

I think  this  just about closes  things.... not much point dealing with call centre scripts at Toyota ......  thanks for  digging into all this stuff for me...it's appreciated

[Marisawright]

4 hours ago, Lanky Lad said:

 The dealership  will not accept bank statements as proof of  ongoing UK pension  monthly payments!   They want a letter from the UK tax office... and look  blank when I say that would  probably entail a 2 month  wait as they decide which  department deals with expats!   AND anything over 90 days is not regarded as "current proof".

If you were working, they wouldn't take your bank account as proof of salary, would they?  They'd require proof of employment. Why should the pension be any different?   Here's where you email to:

https://www.gov.uk/international-pension-centre

I know they can be slow, but that's not the lender's problem.  If their procedures require proof of income, they need proof of income.  It's not a question of Aussies thinking you can walk in and get a piece of paper - any lender, anywhere in the world, would want proof if they were doing their job properly.

 

Edited September 29, 2018 by Marisawright

[Gbye grey sky]

1 hour ago, Marisawright said:

If you were working, they wouldn't take your bank account as proof of salary, would they?  They'd require proof of employment. Why should the pension be any different?   Here's where you email to:

https://www.gov.uk/international-pension-centre

I know they can be slow, but that's not the lender's problem.  If their procedures require proof of income, they need proof of income.  It's not a question of Aussies thinking you can walk in and get a piece of paper - any lender, anywhere in the world, would want proof if they were doing their job properly.

 

A word of warning here.  They never provide any ‘confidential’ information by email.  They will ask for it by snail mail and respond in kind.  I expect it will take weeks or months to get the confirmation in writing unfortunately.

[Marisawright]

1 hour ago, Gbye grey sky said:

They never provide any ‘confidential’ information by email.  They will ask for it by snail mail and respond in kind.

I have had several communications with them about my pension.

You are right, they always answer by snail mail, but they've always accepted my emails (or their online form) and have never asked me to confirm by post.

Besides, I don't think the OP has much choice.  If they want the lender to take the British pension into account, they're going to have to provide proof, arent' they?

Edited September 29, 2018 by Marisawright