Visits on Souqalmal.com’s car loan pages increased by a whopping 148 percent in just one year, from 2014 to 2015. More and more UAE residents are shopping around for car loans, which isn’t surprising given that there were over 400,000 cars sold in the country in 2015.
There are 80 car finance products listed on Souqalmal.com, from 23 different providers in the UAE. Out of these about 52 percent are Shariah-compliant and there’s a 50:50 split between loans for new and used cars. We analyzed our extensive car loan database to share with you some key findings about the requirements, features and latest trends in the UAE car loan market.
Are you eligible to apply for a car loan in the UAE?
Our analysis shows that minimum salary requirements for car loans in the UAE start at just AED 3,000 per month, and 41 percent of all car loans in the UAE have a minimum salary requirement of AED 5,000 or lower. With a monthly salary of AED 10,000, you would meet the minimum salary requirement of 86 percent of all car loans in the UAE.
Majority of the car finance products in the UAE (87.5 percent) also do not have a salary transfer requirement. But banks may incentivize borrowers for transferring their salaries by offering a slightly lower rate.
When you make a car loan inquiry, banks would also want to know which company you work for. This is because many banks only offer loans to employees of companies who are on the banks’ list of approved employers. Even if you don’t work for a listed company, you can still qualify for about one-third of all car loans in the market (32.5 percent). Though such loans are offered by various providers, the interest/profit rate offered on these could be higher.
Other than salary requirements, standard eligibility criteria at banks also requires you to be a UAE resident, at least 21 years of age, and in possession of a valid UAE drivers licence.
[Related: Why shopping around for a car loan pays off]
How much would your car loan actually cost you?
Nearly two-thirds of all car loans in the market (66.5 percent) are offered at flat rates ranging from 2 percent – 3.5 percent per annum. The equivalent reducing rate ranges from 3.6 percent – 6.35 percent. It is important to note that majority of banks in the UAE advertise their car finance products at flat rates.
Our analysis shows that the current average profit/interest rate for car finance in the UAE is around 3.46 percent per annum. The market average for used car loans (3.61 percent) is moderately higher than that for new car loans (3.33 percent).
Other than the interest cost, borrowers must also take into account the arrangement fees, which is usually around 1 percent of the loan amount, and most often subject to a minimum of AED 500 and maximum of AED 2,500.
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Other car finance features you need to know about
About 81 percent of all car loans offer potential borrowers a maximum car finance amount of more than AED 250,000, with 36 percent of the loans pushing the limit even higher to over AED 500,000. However, it is important to remember that the maximum loan amount may vary based on the applicant’s salary and how much of the salary is already going towards existing debt repayments (subject to a maximum Debt Burden Ratio of 50 percent). Your loan is also subject to you putting down a minimum 20 percent down payment and a maximum loan tenure of 60 months.
If you’re looking to finance your next car purchase, Souqalmal.com’s Car Loan Comparison tools can make your search a lot easier, by letting you compare various car finance products based on your requirements and eligibility criteria. You can even customize your search based on whether you’re looking for a new or used car, Shariah compliant finance or a conventional loan and more.