How to buy your ride with a loan

Cars are one of the most expensive purchases you will make other than a house or apartment. A brand-new ride can easily set you back a year's housing rent, so most people don't just pop into a showroom and put down Dh60,000 or Dh100,000 on a vehicle.

The most popular option is taking out a finance package through a dealer or a bank. Although it involves paying high interest charges, loans make it easier for a buyer to acquire a car because the repayments are spread out over several months or years.

There are many portfolios of loan products available in the UAE and most of them allow salaried borrowers to get 80 per cent of a vehicle's value financed by the bank. Depending on a person's income, anyone can borrow as much as Dh600,000 to purchase a new car.

Some finance packages come with extra benefits such as motor insurance; a current account; free credit card, debit card and chequebook; car service contracts and extended warranties. Payment terms can go as long as five years, while interest rates range between 0 per cent and five per cent, which may be dependent on the customer profile and relationship with the bank.

Steve Faulkner, managing director at Al-Futtaim Automotive Financial Services, says that "auto loan interest rates are lower today than at any time in the past five years."

Zero per cent

Banks currently offer car loans for as low as 2.99 per cent. Some lenders are luring car buyers with zero per cent interest. "There has never been a better time to make a vehicle purchase," he adds.

Most often, a borrower is not required to keep an account with the provider to get a loan, and all a customer needs to do is submit the necessary documents. Since the tight lending days, banks have loosened their financing requirements, along with the salary ceilings, allowing anyone with a monthly income of Dh5,000 to Dh10,000 to qualify for an auto loan. Getting your application approved may take less than 60 minutes, as promised by providers such as RakBank.