The Central Bank's new regulations on car financing were certainly a shock for dealers, and it is little surprise that they have caused a certain amount of consternation amongst those who have seen their sales suffer as a result.
Coupled with the effect of the financial crisis, some dealerships have found that the regulations — which demand that customers provide 20 per cent of the cost of the vehicle as a down-payment — have deterred a number of potential buyers from entering the auto market. As such, they are seen as an unnecessary burden on an already struggling industry.
It is unlikely, however, that the critics of the regulations can fail to see both the rationale and the need for them. The grand old days of 100 per cent credit for new cars was a dangerous system, and overly easy access to credit is something that economies across the world — the UAE included — have experienced first-hand.
Indeed, it rarely makes economic sense on both the macro or micro-economic levels to make it easier for people to live beyond their means. After all, I would love to drive a Porsche, but as a lowly journalist I long ago accepted that I probably never will.
The Porsche is an extreme example, and even in the heyday of easy credit neither banks nor dealerships would have been likely to allow me to cut that deal. But one of the first things I was told when I moved to Dubai was that now was the time to buy the car of my dreams. Not only would I be able to drive it on long straight roads with a higher speed limit than in the United Kingdom, but I could afford a vehicle that I could never buy at home. (I opted for a Honda Civic, and it is not a decision I regret, honestly).
Innovative packages
Another benefit of the new rules is that they have forced dealerships to be more innovative with the packages they offer new customers, which will serve to increase competition in the market and drive down prices. This is a good thing for us, as consumers, as well as for dealerships, which are able to stand out from the crowd not only because of their products but for their offers.
As an example, dealerships that spoke to Gulf News at the end of last week outlined various ways that they have sought to encourage wary consumers to get on the auto ladder. Some have found financial ways around the rules, offering down payments in instalments or post-dated cheques, while others have simply imposed discounts on the vehicle's final price.
In the end, while there may be some grumbling about rules, they will not stop people buying their dream cars, they will just make people think more carefully about whether they can afford them before they do.
