Dubai: The UAE Central Bank's restrictions on fin-ancing have hit car sales over the last six months and the new rules have changed the kinds of cars many new buyers are looking for, auto dealers have said.
While dealers describe the new regulations — which require a minimum 20 per cent down payment by buyers for new car — as tough, they also accept that the rules are necessary, and have quickly tried to find ways to prevent the regulations from hurting sales.
"Consumers have suffered the most, considering the down payment is an additional burden," said Junaid Bukhari, Marketing Supervisor at Hyundai.
He said instead of buying large cars, which attract a premium, buyers are opting for more affordable models.
Positive effect
"On the positive side, the regulation has led people to invest in smaller and low-priced cars, which is beneficial to the environment."
Bukhari also admitted that the rules have made it necessary for dealers to offer better payment options and more flexible contracts. This, he believes, has helped to offset any decline in sales.
"Hyundai has looked for different ways to market our brands and products more successfully," he said.
"To keep getting customers into our showrooms we tried to offer new products, such as free insurance and free service contracts.
"The company's sales haven't dropped since the implementation of the new rules, but consumers have become more specific. They are looking for more details as well as negotiating a lot before deciding to buy. As it is not easy to get auto finance when you decide to buy a car, buyers today are genuine."
Naseeb Nasser, marketing manager at Mitsubishi, agreed that the rules had made it more difficult for consumers and had also made then more discerning.
"Since buying and selling cars has become a difficult task nowadays, customers are paying more attention to their choice. They have become more demanding at the time of purchasing a new car: for example, they ask for the smallest details and even car specifications.
"They are looking for the latest, safest, most efficient car at a reasonable price," he said.
"We are seeing some customers taking more time to assess the different options in the market and in making sure that they are taking the right decision."
But Nasser also said the down payment requirement helped dealers to differentiate between genuine customers who can take out a loan and would be able to pay it back adequately and within a suitable time, and those who could not make the payments or would create problems in the future.
In order to avoid a drop in sales, Mitsubishi has worked to create new offers, including special terms of payment and extended warranty policies, he added.
Growth despite rules
Jack Rodencal, managing director of Chrysler, said the rules had not impacted their sales at all. In fact Chrysler has achieved 25 per cent growth over its 2010 performance, he said.
"We welcomed and accepted the new rule," Rodencal said.
"It helped to bring some stability to the market by protecting consumers and ensuring improved security of the banking industry," he added.
However, he did not think the law had had any impact on the demand for more used cars.
He also believed that drivers in the region prefer to buy new cars with a bias toward more luxury models — something that has not diminished since the new regulations took effect.
"In the Middle East, customers have an appreciation and desire for luxurious, well-equipped cars," he said.
Rodencal said that although the effects of the new rules had been negligible, the financial crisis had created challenges for automakers.
"We work with a market-specific focus in order to meet the local market's needs but at the same time ensure the essence and tonality of our campaigns remain true to our brand's personality and premium positioning," he said.
While car dealerships are no longer allowed to offer zero per cent down payment for new car purchases, companies have found a number of ways around the new rules. Some allow customers to pay the 20 per cent down payment in instalments, meaning that buyers could walk away with a Dh100,000 car by putting down just under Dh2,000.
Others have allowed the down payment to be made in post-dated cheques, meaning that the money up front is again negligible. Lastly, some dealerships have used discounts on the prices of new cars in the first place to entice those who otherwise would be put off by the down payment requirement.
Chief beneficiaries of the new rules, however, have been car rental companies, which have seen an increase in customers. As a result, some companies have introduced a system which allows leasers to buy their vehicle after a year.
New steps: Dealers find ways around down payment rule
