GN Focus | Auto Finance and Insurance

That new car is within easy reach

With auto loans now under 3 per cent, petrolheads in the UAE have never had it so good

  • By Hina Navin | Special to GN Focus
  • Published: 00:00 April 11, 2013
  • GN Focus

  • Image Credit: Corbis
  • According to experts, the UAE market is very dynamic, with drivers changing their vehicles every two to three years
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Last year saw a boom in the Middle East’s automobile sales figures. Many international car brands announced a rise, with the UAE being one of the top sellers.

Volvo reported 40 per cent growth in the region, Mercedes-Benz saw regional sales grow by 16.7 per cent, Volkswagen announced an increase of 22 per cent and Toyota posted 30 per cent, while Lexus grew by more than 50 per cent.

Most of the major auto dealers launch vehicles in this region first. The auto product is secured, as the vehicle is mortgaged to the bank.

Mohammad Jamil Berro | CEO, Al Hilal Bank

“The market is very dynamic,” says Mohammad Jamil Berro, CEO, Al Hilal Bank. “Customers change their vehicles every two to three years.

“Most of the major auto dealers launch vehicles in this region first. The auto product is secured, as the vehicle is mortgaged to the bank. Hence we offer very competitive rates as low as 1.99 per cent, which helps our customers drive away their dream vehicles.”

Tooran Asif, Head of Personal Banking, Mashreq adds: “Car loans are available at very competitive prices, under 3 per cent, since these are secured lending with the asset hypothecation providing mitigation against the possibility of potential losses.”

For example, HSBC’s car loans start at a mere 2.25 per cent, while Union National Bank’s begin at an attractive 1.49 per cent.

With competitive bank rates and attractive car deals, purchasing a new car is just an application away.

Know the basics

“Most banks offer car loans to customers with an income of Dh5,000 and above and offer a finance amount of up to Dh750,000 with a minimum down payment of 20 per cent, as mandated by the UAE’s Central Bank for a repayment period of up to 60 months,” says Asif.

“As part of the auto loan, most banks also have value-added offers such as a free credit card, current account and insurance financing. The insurance plan generally includes agency repair.

“Comprehensive cover inclusive of third party is also mandated by almost all banks,” adds Asif.

Read the small print

“Do your homework thoroughly to understand what banks are offering in their terms and conditions, processing fee, Murabaha or interest rates and if the calculation is done on reducing balance or flat interest rate,” says Jamil Berro.

“Most important is how much disposable income you have on a monthly basis, as the commitment from the customer for the [estimated monthly instalment] EMI could be up to five years.”

Says Asif: “One needs to be careful with the small print — the actual pricing, terms and conditions, etc. applicable with regards to the facility. For example, is there any salvage or residual value at the time of maturity, and what is the actual rate of interest applicable on the loan.”

When it comes to new vehicle insurance, study carefully what the plan covers. “A general motor insurance comprehensive cover includes loss or damage to the insured vehicle, unlimited third-party bodily injury liability and property damage with limits applied by the insurer,” says Rishee Sudershan, Chief Executive Officer, Insighters Insurance Brokers.

Other benefits such as hire car and 24-hour emergency roadside assistance are also available.

“As per their requirements, clients can also opt for personal accident benefit for driver and passengers, free medical expenses, free personal belongings with specific limits, and Oman geographical and natural calamities inclusion,” he adds.

Smart borrowing tips

Internet research is a good way to start before you apply for a loan or insurance. With websites such as Souqalmal.com and Moneyshop.ae, comparing rates can’t get easier.

Use the bank you’re comfortable with and where you have a good relationship. This reduces a lot of the hassle of paperwork.

The size of the down payment influences the interest rate. A low down payment cannot always guarantee a good deal — consider other numbers as well. Make a larger down payment to get a lower interest rate.

Remember, a longer lending period means a larger liability and higher interest rates, which could mean you end up paying more than the car is worth.

— H.N.

GN Focus