Dubai: With 2024 Model Year cars all set to arrive at a dealership near you, now could well be the time to head over and buy.
Because this time, these buyers will find that the road to owning a car is getting smoother, with more banks allowing 0 per cent down payment and even up to 3 months before having to pay the first instalment.
Not just that, there are offers extending 0 per cent interest rate for a certain duration of the auto loan.
The deferred initial payments have been of the biggest help to those buyers who are new to the UAE or have just started out at a new job.
The bank offer come on top of the extra incentives dealerships have been throwing on their sales, including super-extended warranties and free insurance.
So far this year, new model launches have not recorded a significant increase in showroom prices, particularly when it comes to entry- and mid-priced cars.
“It’s great to see banks support the car industry by speeding up approval processes and lowering the cost burden wherever they can to help out a buyer,” said the general manager at a leading Dubai dealer. “We had been telling banks for long that they need to do more to help sustain the 3-year growth car sales had in the UAE.”
What the dealer says about increased cost of ownership is on the ball. Auto loan rates have seen the lift from the successive base interest rate hikes the UAE Central Bank brought since March 2022, in sync with the US Federal Reserve actions.
At the start of the year, several auto industry sources had voiced concerns that growth would stall if car buyers delayed their purchases over their concerns about the higher EMIs. Plus, motor insurance rates too have shot up since the start of the year, with insurers unwilling to pay the extra low rates in vogue during 2021-22.
UAE banks are pushing auto loans more aggressively and build on what proved to be an especially strong first-half for the sector. All of the major banks reported significant increases in their loan books – while bringing down the impairment charges.
“We expect more banks to become lenient on their down payments,” said another dealer. “New car sales had dropped slightly after Eid, but we expect a major pick up from September.
“At least 2 out of every 5 of our buyers are new to the country, and reflects what’s showing up in the population increases in the UAE. Most of them come with good credit records, and that’s also a factor in UAE banks extending auto loans quickly.”
What banks must watch out for
At the same time, banking sources say they are keeping close watch on risks associated with someone missing a payment because of changes to their job situation or simply failing to meet all of his/her obligations. (This is not just on auto loans, but across mortgages, credit card bills, etc.)
“With the rise in cost of living, that monitoring of loan books is always on,” said a banker. “So far, we haven’t seen any major stresses from delayed/non-payments on a majority of the loans. If someone has a payment issue and wishes to defer the next instalment, they can talk to us about it. We will help them.”
The current rates on deferring an auto loan instalment is around the Dh100 month. To be eligible, banks require:
• The individual should not have missed or made late payments previously.
• The deferring of payments can be done in non-consecutive months. On auto loans, that’s one a year.
But this is a market where new car sales are still buzzing, and come September, there should be more buying action. With 0 per cent down payment and extended periods on the first instalment, UAE banks are doing their part in letting it all happen...