This Is How You Can Get Your Dream Car

A car is not just a car; it comes laden with goodies too, especially during the holy month of Ramadan. The wise buyer is one who knows how to cut through the clutter and glitter of sops offered by auto dealers on their favourite brands, and also keeps a sharp eye out for the best way to finance that dream vehicle.

The UAE auto market has always been an exciting one, but with the introduction of VAT in January this year, sales have been a tad sluggish. This is why auto dealers are pulling out all stops to woo car lovers this Ramadan and it's literally raining discounts and deals.

From iPhones, cashback, free registration, extended warranty, insurance premiums to paying a percentage of downpayment, dealers are trying to make this a buyers' market, even pricing in VAT, so as not to irritate customers. This is indeed a good time to drive a bargain, but not without paying attention to how you will finance this big-ticket purchase.

Cautious step 

Remember, it's easy to get carried away the moment you find that sleek car of your choice. Take some time to sober down and understand that shopping for auto finance is almost as tricky as finding the right car. Innocuous options in financing packages can make a major difference when you are making a large buy.

So, even before you choose your car, make sure you know all about available auto-finance options. This would depend on whether you are buying a brand-new vehicle, straight from the showroom, in which case you need to go for 'new vehicle finance' or opt for 'used vehicle finance' if it is a pre-owned car.

Be informed

Most car showrooms and dealerships are linked to bank representatives who can provide you on-the-spot information. However, for your own satisfaction, you may cross-check with comparison websites to arrive at an informed consent. Some banks in the market also offer reduced rates if you are taking the auto finance along with a credit card, or if your salary account is with them. Moreover, some banks now also offer to pay your Insurance fee and accessories that you may choose to buy along with the new car.

Buyers applying for auto finance need not worry about basics. You must submit three months' bank statements and a valuation certificate for the car you want to purchase. You must have valid UAE driving licence and a clean financial record, backed up by a salary certificate and a good credit report from the Al Etihad Credit Bureau.

Financing of new or used cars have a tenure of up to a maximum of 60 months and buyers can get financing for only 80 per cent of the new or used car's value and must make a 20 per cent downpayment. There is also a minimum salary requirement that varies between Dh5,000 to Dh8,000 per month.

The tricky part of any financing project is balancing your choices and this needs some attention. Here's a list of dos and don'ts in case of confusion.

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The dos

Check out profit rates: Banks and financial institutions have varying profit rates up to 4 per cent, and finance only 80 per cent of the value of the car.

Check all costs: Make sure you ask about the bank fees and charges that go into auto financing. You may request bank personnel to give a break-up of all costs, a rate calendar and pre-payment penalties or fees, if any. Also, check the entire amount you will actually pay at the end of the tenure.

Check perks: These days, customers are given so many options and combo offers that they often end up confused. It is important to delineate what the car dealership is offering and the specific perks available at the bank's end. During Ramadan, dealers offer free car registration or servicing contracts, so check with your bank, the kind of benefits they have on offer, in the form of credit cards or insurance.

Check for insurance: Insurance is a crucial part of car ownership, so always check to see if your financing comes with insurance cover, or any other maintenance or travel benefits. It may be worthwhile to make an extra effort and check with various banks on this.

The don'ts

Don't be in a rush: It is better to give yourself breathing space before booking an expensive car and plunging headlong into the first financing package that is pushed your way.

Don't go for a heavy burden: Never lose sight of your total financing burden and long-term plans. If you already have a home finance and need to take an education or personal loan in the near future, make sure to factor it in.

Don't roll a debt: Guard against rolling old debt onto a new one as this results in negative equity. It is always better to clear off the old portfolio before going for new financing.

Don't ignore the fine print: Car buyers should not shy away from asking questions and seeking clarification from their bankers on various loan processing fees, which can make substantial difference to one's pay-outs. Contract clauses vary greatly from one institution to another, so perhaps it is better to go for reputable banks, which have greater transparency, even if profit rates are higher.

We live in an age of multiple choices, which can often get confusing. It is, therefore, up to the consumer to seek detailed information about products and services - whether it is a dream car or financing options. Be informed, be safe in Ramadan.

By Girish Advani

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Al Bawaba Business.