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Strolling through the lively streets of Dubai is like a speedy cart ride on a rollercoaster. But what if you have no idea how to make that dream a reality without spending a fortune? An auto loan might be the ideal choice! The following guide will provide a comprehensive view of everything you should know before getting started. Including different types of financing options as well as the main elements to consider. Whether you are venturing as a novice or keen to upgrade, we will make sure you are ready to drive on the high seas with no worries!
Important Things Before Buying a Car on Installment
Purchasing a car is the happiest thing in life. However, it might turn out to be a puzzling situation sometimes. Especially, when you contemplate dealing in installments in Dubai. The challenge becomes possible when you acknowledge the numerous points. Such as down payments and finance options. This is your guide to what really matters before making your seasonal purchase.
Down Payment or Deposit
Buying a car on installment usually involves a down payment or deposit. It is required beforehand. This amount will be some percentage growth of the car’s full value thus it will differ from bank to bank. Normally, plan to allocate about 10% to 30% of the initial value of your car as a down payment.
Why is the Down Payment Part so Important?
A high down payment is a great help to you. As it will commit you to finance a smaller amount and ultimately lower your monthly payments and interests. This amount also serves as a beneficial means to you at the lender’s side. Showing that you have the financial discipline, and stand a chance to negotiate better loan terms.
Payment Plans
After the down payment, you will enter the repayment phase. It can be structured in various ways:
a. Monthly Payments
Most customers opt for this payment plan. Here you pay a specific amount at regular intervals for a period of between twelve and sixty months. Your monthly payment is a part of the principal and interest combined.
b. Quarterly or Semi-Annual Payments
If your financial situation allows, you can choose quarterly or semi-annual payments. This option caters to the needs of individuals who do not have a steady income.
c. Flexible Payment Plans
Banks and financial institutions that provide flexible payment plans are the best option so far. It’s a service that allows you to change your monthly payment amounts. Or to make extra payments without penalties. This can make your financial life more comfortable.
Interest Rates
The loan rates in the UAE are conditioned by many factors, which include:
Budget: Long-term loans tend to have lower rates.
Financing Bank: Different institutions offer various rates.
Credit History: A good credit rating can help you with lower rates.
Car Specifications: The specific car brand and type can also influence rates.
Interest Rates Based on Tenor
- Up to 1 Year: About 2% to 4% annually.
- 1 to 3 Years: About 3% to 6% per annum.
- 3 to 5 Years: Approximately 4% to 7% yearly.
- Over 5 Years: Rates mostly rise and differ widely.
Major Banks Offering Car Loans
Many leading banks in the UAE are funding car loans and payments on installments such as:
Emirates NBD: It is the most affordable option for loans above AED 100,000.
Abu Dhabi Commercial Bank (ADCB): Loans up to AED 250,000 at attractive rates.
Dubai Islamic Bank (DIB): Compliance to the Sharia law can be achieved by this bank.
Mashreq Bank: It is the go-to bank for the best financing solutions when the loan cap is AED 500,000.
The Interest Rates for Reference
Emirates NBD: It will give you an opportunity to choose from 3.49% to 4.49%. This is charged annually with loans that cover up to 48 months.
ADCB: It offers rates between 3.99% and 4.99% for loans of up to 60 months.
DIB: This lists the interest prices of 3.49%-4.99% for loans of no more than AED 1,500,000.
Steps to Buy a Car on Installments
Consider these steps to help you get through the purchase process:
a. Pick a Car
Choose the car make and model that you can fit into your budget.
b. Pick the Best Deal
Gather potential financial options from banks, financial institutions, and car dealerships. Narrow the data by comparing interest rates, terms, and document requirements for all prospective lenders.
c. Preparing the Required Documents
Prepare the list of documents that you will submit, and be sure to include:
- The Emirates ID
- Your passport and visa
- A driver’s license
- Your bank statements
- The employment contracts
Loan Application
You will apply to the bank or car dealer. Then go ahead with the loan you need to give applications that are relevant to the loan.
Credit Evaluation
The lender will begin the due diligence process on your credit profile. While checking your income and credit report to determine if the loan will be granted. It is based on your repayment capacity.
Approval Notification
After the favorable examination, the notification should be given to you. It is regarding the amount of the loan you have been approved for.
Deal Closure
You can finalize the process by discussing the loan and signing the necessary forms. Then getting the details of the payment plan, the rate of the interest, and penalties where applicable.
Deposit Payment
Pay the required deposit before gaining ownership of the vehicle.
Car Acquisition
After you’ve completed the deal and paid the required fee, you will get your new car.
Major Car Dealers Providing Financing
Several top car dealerships provide the financing options for the vehicle buying; for example:
- Al-Futtaim Automotive
- AGMC (The Authorized BMW Dealer)
- Trading Enterprises (Volvo Dealer)
- Arabian Automobiles (Nissan, Infiniti, and Renault Dealer)
- Al Nabooda Automobiles (Porsche and Volkswagen Dealer)
Offenses and Penalties
You should be aware that there are certain penalties associated with late payments which may include:
- A fixed sum or a percentage of the due account
- A daily penalty for each day of overdue payment
- A financial sanction due to the loan default
Thus, it becomes imperative for you to check and familiarize yourself with the terms and penalties determined by the lender.
Top Things to Consider while Buying Car
When it comes to buying a car on installment in Dubai, there are actual crunch factors to account. Here are the major considerations before you make your buying decision:
Budget and Affordability
Check your finances first and then establish how much you can part with to move from your old car to a new one. You also need to factor in expenses on fuel, car insurance, and maintenance, among others.
Down Payment Requirements
The majority of financial institutions ask for a down payment which is the car’s value from 10% to 30%. Furthermore, when you pay a larger part of the down payment you will pay lower monthly payments. Also, the total interest costs are decreased.
Loan Terms and Conditions
The loan deal usually ranges from 1 to 7 years. Longer terms relate to lesser monthly payments. Although they result in more interest paid during the full loan period. It would be wise to compare the interest rates available from various banks and financial institutions.
Credit Score and History
The power of your credit history to determine the extent of your chances to get a loan is quite considerable.
Types of Loans and Payment Plans
There are different kinds of car loans to examine. Want to pay monthly, quarterly, or semi-annual payments depending on your budget?
Research about the Resale Price
Look into what the car can fetch in the market if you ever decide to sell it, as the various brands and models have different tracing rates. A higher resale price will benefit you if you happen to sell the car one day.
Consider Warranty Options
Any warranty policies that are offered by the manufacturer or dealer directly affect-obligate covering unexpected repair expenditures.
Dealer Reputation
Shopping from a reputable dealer will make sure that you get good services and the right price.
To Wrap Up
If you are to buy a car on installment in Dubai, then you must know about the main areas concerning it. It should be noted that the startup involves the continuous payment of a down payment. Also consider the interest rates in securing financings. Getting adequate knowledge will certainly help you through your journey. Always remember to do the research and compare rates and terms being offered by financial institutions and auto dealers. This ensures you get the best deal.
