Keep the emotional factor at a distance when buying a car
The UAE is seeing more newcomers taking up residency, and dealerships want banks to help them out in meeting their need for a vehicle. Image Credit: Pixabay

Dubai: Banks in the UAE need to be more lenient when it comes to financing car purchases – more so as lending costs are in for steady increases.

“Can banks do more to help? Definitely,” said a top official with one of the leading dealerships in the UAE. “I might be wrong, but only always gets the impression auto financing is not a priority area for lenders here. Delayed decisions and outright rejections are hurting sales, anywhere by 2-3 per cent.

“When the UAE auto market is riding through one of its best growth phases, banks need to help out more.”

The angst among dealerships is because a sizeable portion of the current demand is coming from first-time car buyers – or those who are newly resident in the country. Many of them are on their first jobs, and, thus, are yet to rack up a decent credit score that would satisfy banks. (Average auto loan rates are at around 2.5 per cent and, as with other lending, will be in for quite a significant jump during the rest of the year.)

Dealerships confirm that the number of first-time car buyers touched the 30 per cent plus mark during the first three months of 2022. “A sizeable majority of these buyers prefer pricey SUVs,” said another dealer. “Then, you get calls from the banks saying these buyers are untested on their credit history, and that it would be difficult to extend the full loan they need to buy the model of their choice. We cannot go back and tell the buyer to think of owning a lower priced model.

“This situation only creates disgruntled buyers.”


The share of SUVs bought during Q1-22, which UAE dealerships say is the first time they have seen off-roaders take the lead over car sales

High demand, less stocks

In the first quarter, new car sales in the UAE were 10 per cent higher from a year ago. This would have been more if it had not been for dealerships having less stocks to sell. Global chip shortages are affecting all industries reliant on high-tech, and cars with all the new-fangled on-board systems need their share of chips too. When that’s not readily available, production delays happen, and shipments meant for UAE and other dealerships take a hit.

Dealerships confirm that between the booking and delivery to the new owners, the time taken is around two to three months. The most optimistic forecasts suggest that a return to normal could happen only by the fourth quarter.

Lease rather than buy

Dealerships do not want to see a situation where difficulty with accessing auto loans force potential first-time buyers to lease a vehicle rather than buy. “Already, a younger demographic of UAE residents think it’s more convenient to rent or ride-hail than own a car of their dreams,” said a dealer. “That’s part of a worldwide trend – now, if bank loans become difficult to access for those willing to own a car, the momentum of recent months will stall. No one wants that.”