Class Action Alleges Toyota Finance Sold ‘Junk’ Insurance

A class-action lawsuit has been filed against Toyota Financial Services over allegations it added thousands of dollars of "worthless" insurance policies to new-car finance deals.

It’s alleged Toyota’s finance arm added Payment Protection Insurance, Finance Gap Insurance, and Extended Warranty Insurance to vehicle loans – with some customers allegedly being told they were required to purchase the insurance products.

Echo Law is leading the latest class action, and is the same firm that filed a lawsuit against Toyota in early 2024 for allegedly providing ‘flex commissions’ to dealers by allowing them to set interest rates on car loans – supposedly in breach of financial regulations.

It’s understood the Supreme Court has determined both class actions be managed together.

“We had no idea we had been sold this insurance. If it had been brought to our attention, we never would have signed the contract because I know extended warranties are useless,” said Kingsley Smith, who purchased a vehicle from a Toyota dealership in 2018 with his partner, Jessika.

The couple claim they only recently discovered the Toyota extended warranty as part of their car loan, which added $1445 to the finance.

“I thought we’d been treated fairly. Toyota is a well-known, trusted brand – we didn’t think they’d engage in this type of dodgy conduct,” Mr Smith said in a written statement provided to CarSauce.

“We’re a working-class family, and like so many others, every dollar counts. It’s not okay that they’ve taken advantage of us, and so many other Australians, while lining their own pockets.”

As part of a review conducted by the Australian Securities and Investments Commission (ASIC) in September 2016, it was found that many insurance policies provided negative value – where the premium paid by the consumer is higher than the payout for a successful claim.

However, according to Alex Blennerhassett, Principal Lawyer at Echo Law, many customers were ineligible to claim on their policies – despite paying thousands in premiums.

“In other cases, consumers were never told the insurance policies had been added to their car loan, or were told it was a requirement that they purchase the insurance,” Ms Blennerhassett said.

“We expect there to be a significant number of persons who are group members in both proceedings and are urging those who think they might have been sold junk insurance by Toyota Finance to check their loan documentation and register their interest in the class actions.”

CarSauce reached out to Toyota Finance, and a spokesperson provided the following statement: "Toyota Finance Australia Limited can confirm it is defending the class action proceedings commenced by Echo Law. As the matter is before the Court, it is not appropriate to make any further comment."