Dubai: For some time now, UAE’s existing resident base has been taking the 20 per cent down payment requirement on car purchases in their stride. But the same may not be true for relative newcomers to the UAE and who have just started scouting around for a vehicle to buy.

For them to commit to 20 per cent up front and early into their stint in the country can be daunting. Automotive finance companies are keenly aware of the situation. (It was in 2011 that the UAE Central Bank made it mandatory for the 20 per cent to be paid up.)

“The 20 per cent down payment has become the norm for UAE residents... although it remains a shock to many new expats,” said Steve Faulkner, regional managing director at Al-Futtaim Finance. “We have seen customers continuing to avail of a personal loan to fund the 20 per cent, or in some cases move away from a purchase to a full operating lease as an alternative — this mitigates the need for any form of down payment.”

Thankfully, financing rates are still on the lower side, with a flat rate from leading providers averaging in the 3-4 per cent range. For a reducing rate, the offers are in the 6-7 per cent band. “But financing rates on the whole had a slight increase over last year, by 0.25 per cent. This was anticipated and follows the strategy of banks across the UAE,” said Faulkner. “Vehicle promotions, including financing packages, have been strong throughout this year and continuing on from 2013. We anticipate that the Ramadan offers and the timing of the Holy Month will drive increased sales across all brands.”

According to Michel Ayat of Arabian Automobiles, the market could be primed for “ever aggressive” deals. “Second-tier brands can pitch offers that come with guaranteed buybacks trying to find buyers who are not particular about their choice of model or brand,” said Ayat. “A lot depends on to what extent individual dealerships want to push through with rotating their inventory. The last thing they want to have are unsold stocks as a particular model year winds down and a new one begins.

“At the end of the day, a value proposition can make or break a brand.”