Dubai’s love affair with wheels is legendary. In a city where petrol prices are among the cheapest in the world and walking around isn’t an option for most of the year, shopping for a car is one of the first things to check off the to-do list after landing in the land of plenty.
Given the tax-free economy, automobiles are more affordable here compared to other parts of the world, offering people the opportunity to buy a car that they could not have afforded otherwise. But despite the comparatively high affordability factor, most people need car financing.
GN Focus gets expert dealers and financiers to help you negotiate the lengthy and time-consuming process of getting your first car loan so all you have to think about is where to go for your first long drive.
The Islamic route
Jamal Alvi, Business Head of Assets, ADIB, explains Sharia-compliant auto financing solutions using ADIB examples. There are typically two major types of financing. The first one is through the murabaha Islamic financing structure, which requires a 20 per cent down payment. One benefit of this is that the customer qualifies for job-loss protection, whereby repayments are suspended for up to six months. The other is the ijarah structure, with zero down-payment. Ijarah is a form of financing, whereby the finance provider, in this case ADIB, purchases the car and the customer leases it from the bank for a fixed period of time. When the lease is over, the customer can purchase the car from ADIB for only Dh1,000.
From the beginning
Thierry Seys, General Manager, Al Nabooda Automobiles, Volkswagen, explains the process: "As soon as the customer enters the showroom, one of our expert sales consultants helps establish their specific needs in relation to selecting a Volkswagen vehicle. The sales consultant shares relevant information about the car and explains the options in terms of colour, price, availability, delivery time and collecting a
down payment.
"The customer is then introduced to the finance manager to discuss the best finance and insurance options available. Our finance manager will discuss the customer’s financial needs and help them arrange a payment plan with one of our approved banks.
"We pride ourselves on offering Volkswagen customers a hassle-free service. This is why we collect all the relevant documents for the auto loan from the customer and submit these to the bank. We’ll also keep you updated on the progress of the loan. "Once approval from the bank is received, we’ll prepare the insurance and registration documents for the vehicle, and then it’s ready for collection.
At the bank
John Chang, Head of Personal Banking at Noor Bank, outlines the workflow and necessary documentation required for your first car loan, be it conventional or Islamic.
1) Upon finalising a car in the showroom, the customer provides photocopies of identification documents along with the quotation for the car.
2) In case the customer is self-employed, they should provide photocopies of identification documents, legal documents, three month’s personal bank statement, six month’s company bank statements and a quotation for the car, which the showroom will provide.
3) The bank collects the documents from the showroom or from the customer directly and confirms the customer’s eligibility before submitting the file for pre-approval. Turnaround time for making decisions on each case is approximately two days.
4) Once the case is pre-approved, the sales team contacts the customer and collects the original bank statement and salary certificate. The bank also verifies the copies of identification and legal documents with the originals.
5) The customer signs a letter of understanding with the bank.
6) In the final step, the bank issues a local purchase order. In the case of Islamic banking, a murabaha agreement (a sales and purchase order) is also issued, which includes the vehicle details and the terms and conditions. This is done as as soon as the client deposits the processing fee, post-dated cheques and down payment confirmation.
7) The bank holds the original murabaha agreement and a photocopy is provided to
the customer.
8) Note that processing fees and profit rates differ from bank to bank, so it is important to shop around before taking your loan.
Preparing the paperwork
Colin Cordery, Regional Managing Director, Al Futtaim Honda, puts together the perfect checklist for all the documentation required.
For an individual or retail customer, this includes:
1) Valid passport copy and visa page (for expatriates)
2) Valid passport copy and Idbara page (for UAE nationals)
3) Valid Emirates ID copy
4) Labour card or free zone ID for free zone employees
5) UAE driving licence copy
6) Salary certificate with a validity of one month from the date of issue
7) Last three month’s bank statements showing three salary transfers
8) Last three month’s pay slips
Documents bank require for SME — Small and Medium Enterprises:
1) Memorandum of association
2) Partnership deed
3) Six months of company’s bank statements
4) Copy of a valid trade licence.
5) Authorised signatory’s power of attorney
6) Audited financial statement
7) Passport copy and Emirates ID of all partner
