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Car finance in Dubai

Wednesday 16 January 2019 (UAE)   

Car finance and auto loans in Dubai, Abu Dhabi, UAE

This page under development.

Car and auto loans in Dubai and UAE, finance, hire purchase, bank loans for motorcycles, boats, and other vehicles, paying off a car loan and other information.

Arranging a car loan in Dubai

There are normally two places you'll go to get finance - the car dealer (whether second hand or new), or directly from a bank. If you arrange financing from the dealer, you'll be getting money from a bank or financial institute anyway but sometimes you get a better deal, and probably better service. Other possibilities include, borrowing money from friends or family, borrowing from a loan shark, or stealing money. None of those alternatives are recommended.

There are then two types of loan arrangements. One is a car finance or auto finance loan where the bank owns the car for the length of the loan, the other is a personal loan where you own the car.

There are also two types of financing - Islamic or Sharia compliant financing where you don't pay interest as such since the payment of interest is 'Haram' (forbidden) according to Islam, and non-Sharia loans where you do pay interest. Islamic financing is not the same as getting an interest-free or 0% interest rate loan. What happens is that the financing institution buys the car (or anything else being financed) and sells it to you for a higher price which you repay in monthly payments.

Car loans are generally for 2, 3, or 4 years (24, 36, 48 months). Occasionally loans for up to 5 years or longer are available (Amanah Islamic finance from HSBC goes to 7 years). Personal loans are mostly for 1-5 years.

You can buy a second hand car with vehicle finance but there is an age limit of 3-5 years depending on the bank or finance institute - probably because cars older than 5 years are difficult to get comprehensive insurance for. For an old banger, you'll have to get a personal loan. Interest rates are higher for a second hand car than a new car, and even higher for a personal loan.

Car loans do not usually require you to have a salary transfer to the bank. Personal loans do, although it might be possible to find a personal loan without a salary transfer requirement.

Paperwork required

You'll need something like (originals and copies):

  • Passport with residence visa.
  • Emirates ID (if requested might not be essential if you have residence visa).
  • UAE driving license.
  • A salary letter or certificate (your company will know what to provide).
  • 3-6 months bank statements.
  • Details of the car you want to buy - just telling the bank isn't enough, you'll need the paperwork from the dealer. This can be difficult if you want to arrange a car loan in advance for a second hand private vehicle purchase, you will probably find it easier to get a personal loan in this case.

Special Offers

There's always a special offer on car finance around somewhere. Some examples:

  • Cheap interest rates (eg in Nov 2006 CBI - Commerical Bank International - was offering 3.75%, meBank went one better and offered 3.25%).
  • Free membership of a breakdown recovery organisation eg AAA (Arabian Automobile Association).
  • Discounts on car insurance.
  • Zero downpayments.
  • Deferred payment options.
  • Free credit cards (meaning no annual fee, not 0% interest rate).
  • Buyback schemes (eg RAK Bank has a clever scheme where you only pay 50% of the price and after 2 years you own nothing).

Terms and Conditions

Always read the small print. Things to watch out for are:

  • Fees for arranging a loan. A fee of 1% may not sound like much but it's still an extra 1000 dhs on a loan of 100,000 dhs.
  • Additional costs for early settlement of a loan (which you'll have to do if you sell the car before the loan period is finished). Expect to pay up to 5% of the outstanding balance, and possibly extra settlement fees of several hundred dhs.
  • Penalties for missing a payment if there are insufficient funds available - loan payments are automatic normally.

Extra details that may trip you up with a car loan (these don't apply with personal loans):

  • Possible requirement to take out car insurance with a specified provider rather than one of your own choice.
  • Difficulties when crossing borders - as you are not the owner, you need permission from the owner which is the bank in this case. Getting a letter arranged will cost a fee (and time). Driving to Oman might be ok without the letter - the border authorities normally just want to see insurance for Oman and that the car's registration is up to date.
  • When selling a car, you need a permission letter from the bank since their name is on the registration card. Which means another letter and another fee.

Best banks for car loans in Dubai and the UAE

  • Abu Dhabi Commercial Bank (ADCB).
  • CBI (Commercial Bank International) - reputation unknown but promotions sometimes sound good (yes, that means a good PR agency or marketing department, not necessarily a good car loan department, but they made us think about it).
  • Dubai Islamic Bank (DIB).
  • Standard-Chartered Bank.
  • RAK Bank (National Bank of Ras Al Khaimah).

This is not necessarily a list of highly recommended banks - in Dubai it seems like all banks will annoy their customers sooner or later. Just be patient and wait your turn if you think you're being treated too well. Often you'll be better off if you either go through the car dealer since they have a vested interest in loan arrangements being arranged efficiently, or through some sort of liason between the company where you are employed and a bank they deal with.

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Last update Sunday 08-Jun-2014.
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