By Andrew Klein
Light reading from a rather miffed old fart
Buying a car is an expensive challenge at the best of times. These days one can use the internet to go forth and find a vehicle that is within the price range planned. Not that I am fond of wasting money on cars but there is a time in one’s life where the body says; “It’s time that you find some way of getting around without having to borrow your sister’s car, and given the pounding your body has had … difficult to access public transport and the cost of taxis and a desire to get around … well … Its time.“
So there I was. Looking for something in my price range and second-hand, a car that reflected many of my own character traits. Living within my price range and very much second hand at my age.
Now, dealers of used cars can be fun. We are all familiar with the jokes and the stories that are told about this particular trade. So here is my contribution to the adventures of buying a second-hand car.
The only reason I am sharing this one is because it was not just funny but maybe a sign of the times.
I had made an effort to save money for some time to be able to pay cash for my future means of transport. Call me old fashioned, but I don’t want to borrow money at high interest rates and be at the mercy of one or other finance company. The other reason being is that I don’t have a credit rating. I have never been bankrupt, always paid my bills and am financially secure. I have never had a credit card, preferring to save my cash and then make a purchase. This of course does not apply to business practices, where credit is used. But I am talking about the individual me. I discovered that I had no credit history when I tried to apply for a credit card some time ago. I thought it prudent to have access to credit when required for emergencies. I completed the forms proudly listing my assets, income and the usual things one is proud of and with some pride I also noted that I had no debts.
Now I would have thought that at my age, being debt-free would be something to be proud of. But apparently not. I received a rather curt note from the credit card service supplier – a subsidiary of one our major banks – informing me that as I had no record of debt and no liabilities, I was not able to go into debt.
I was stunned. Had I spent my life in debt, owed money and was barely managing to keep afloat financially as a private individual they would gladly not just provide me with a credit card but also offered to consolidate my existing debts which they would manage at a low rate of interest for a ‘honeymoon period‘.
Of course, after the honeymoon was over the interest rate would have shot through the roof and, given the many variables in life this approach to lending money could well have caused me problem. To me this indicates a major problem with the approach of banks and lending practices.
The more one has been in debt, the easier it is to acquire further debt and there is little incentive to save as amounts under a $100,000 attract very poor rates from the banks for borrowing money from the customer, but the same money lent out to borrowers comes at a high cost .
Money, like all things has to be bought and the Interest we way is the cost of that money.
I blame my mother; she taught me to be prudent in my financial dealings and to always try and pay cash or come to a mutually rewarding outcome avoiding banks, and now the banks were punishing me for not having borrowed money. Having once had a mortgage to buy a house did not count because that mortgage was discharged a long time ago (and no more funds being paid to the bank for that one).
Where does that leave the ordinary person that has no credit history or worse, a very bad credit history after having bought into the ‘credit scam’? After all, you are buying the use of money which belongs to other people that have put their money into banks to keep it safe (or so the story goes) and the bank acts as a ‘middle man’ selling you something it does not even own itself. I suppose one could argue that it is lending you the use of money that belongs to a third party and has some obligation to ensure that that money is safe for that third party. Given the history of banking, even this appears a myth, for in buying certain ‘bank products‘ and ‘bank services‘, the customer (lender to bank) is actually taking a huge risk. Banks are involved in superannuation schemes, retirement funds and all manner of ‘money-selling ventures‘ often using other names and identities. When things go terribly pear shaped as during the Global Financial Crisis, several of my friends lost large amounts of money that was meant to have been protected for their retirement.
One minute it was there, then next the New York Stock Market goes belly up and people get bitten in their financial arse in Australia. I remember at the time asking the financial advisors that had organized the monies belonging to friends as to what happened to these investments for retirement. The consensus comment was – “It is gone !” How can money just disappear? How can billions of dollars make a great escape, never to be seen again? The usual refrain was a referral to the stock market, where such funds had been applied to a vast assortment of companies (some superannuation funds would list over a hundred assorted companies, i.e. 1% of holdings to ‘Smelly Fish Pty Ltd’, 0.5 % of holdings to ‘Toe Rag Pty Ltd‘, ad nauseum. (Of course none of the 1% could even be found on the internet for verification but as part of an investment portfolio sold by a bank-related Fund had appeared all to very secure).
Money cannot disappear; it moves from one account to another. There is no money eating monster that digests huge amounts of liquid cash turning it into thin, bad smelling air. Indeed, no one can tell where these other accounts are but had I been in charge of financial policy and governance I would have applied the old saying “Follow the money trail” with vigour.
Where does this leave the person that requires cash at short notice and unable to buy such funds from a bank? Well, the answer is simple: being regarded as a higher risk, the borrower is forced to obtain funds from legal loan sharks in Australia. The cheerful franchises that offer money at incredibly high rates and would sell your children into prostitution or coal mines if the proponents of neoliberal free market trickledown theory had their way .
Next time I might carefully examine the many wonderful money laundering services that have become part of the Australian financial scene.
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