A review of BMW‘s financing practices in Australia has revealed that the firm has been giving loans to people without any disposable income or means to pay them back.

Put together by consultants Ernst & Young and obtained by The Age, it reveals that BMW Australia Finance was vastly underestimating people’s monthly living expenses during their assessment for a loan.

Incredibly, in 100 cases that were examined, the German firm’s local financing arm quoted about 20 per cent of prospective customers having zero general living expenses and approved loans for people with negative disposable income.

For instance, BMW approved a $27,000 loan for a single mother with 10 children despite her only having casual employment and no disposable income. Meanwhile, a 76-year-old was loaned almost $50,000, about double the value of the car, based purely on earning projections rather than his real income.

The report blames a strong sales culture for the reckless loan scheme, since dealers would receive a $375 commission when approving a loan with a 5.49 per cent interest rate. If a loan at the maximum applicable 12.29 per cent was secured, the dealer received an $8,163 sales commission. It doesn’t take a genius to figure out the bubble would burst.

In a statement, BMW said it is co-operating with the Australian Securities and Investments Commission and is “fully committed to implementing a business model which reflects the industry’s best practice compliance, business processes and customer service.”