Car finance? Only with Dh5,000 or more salary
UAE banks have hiked minimum salary requirement from people interested in buying low-cost cars. But dealers warned that this will put breaks on the sale of new vehicles in the country.
Currently, banks demand that prospective borrowers should have a minimum monthly salary of Dh5,000 compared to the previous level of Dh3,000 a month, Business Monitor International said in a study released on Thursday.
“This has limited the market in the UAE, especially for more low-cost models. The rules have been loosened in 2010, allowing those with lower salaries to secure financing, but only if the customers first make a substantial down payment. It is unlikely that car sales in the UAE will see pre-crisis growth rates until the finance bottleneck is resolved,” BMI added.
Car dealers in the UAE have continued to complain about stricter lending rules by car finance companies. Since the onset of the global financial crisis, car finance companies in the UAE have tightened their lending practices.
In an interview with Emirates 24l7, Madhu Pillai, Group General Manager for Al Naboodah Commercial Group, said that people working in volatile sectors like construction and real estate are finding it tougher to get access to auto financing as financial institutions believe that those industries still are under risk.
“They are quite careful and scrutinise the documents. People working in real estate and construction industries find it difficult to get bank finance than someone working in a trading company.”
Pillai said: “What has changed is that banks are much more sensible in lending terms. In the past, banks offered 0 per cent down payment to buy new cars and were falling over to get the business. But today, they are much more selective and understand that lending 100 per cent of car’s value is not the best thing to do.”
BMI, however, projected that vehicles sales in the UAE are expected to jump 70 per cent to 600,672 units by 2015 helped by recovery in the country’s economy.
Following drop in the 2009, the auto sales will rebound in 2010 to 352,913 units compared to 325,274 in 2009. Sales peaked in 2008 reaching 355,117 units.
“The economy suffered a massive setback in 2009 with the debt problems caused by the collapse in the property market. These problems have receded into the background even if they have not quite yet been resolved. The UAE does not currently have any auto production facilities and as such its sales are exclusively composed of imports from international producers,” it said.
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