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Get the best car finance deal in UAE

Are you planning to buy a new or used car? Then be careful about how you finance it, because it's a big purchase and the deal you decide on now will determine how much you pay for several months to come. Photo: Thinkstock

Are you planning to buy a new or used car? Then be careful about how you finance it, because it's a big purchase and the deal you decide on now will determine how much you pay for several months to come.

To put it simply, if you want a AED 100,000 car and you take out a three-year loan of AED 80,000 at a flat rate of 2.99%, you will pay AED 2,422 a month with a total interest on the loan of AED 7,176.

Take the same loan at a rate of 4.5% and it will set you back AED 2,522. That may only be AED 100 or so more a month but over three years it’s an extra AED 3,624! Now that’s something to think about.

But it's not as simple as going for the cheapest rate. The cheapest rate may require a minimum salary that you can't meet, or demand you transfer your salary to the bank offering the loan.

GET THE BEST DEAL

For example HSBC currently has an offer of a flat rate 2.25%, the lowest interest rate currently on the market. However, you are required to transfer your salary to them and have a minimum salary of AED7,500 a month.

The other thing to consider is whether or not you have the funds to pay for the deposit. Under UAE Central Bank rules, anyone buying a car must put down 20% of the value of the car.

This means, if you're buying a car for AED 100,000, you need a deposit of AED 20,000 – another reason to get the best finance deal in place.

However, there is the option of going for a lease agreement which requires 0% down payment. For example, ADIB, currently has a Car Ijarah product which requires 0% down payment, which can potentially be a plus if you do not have the immediate funds for down payment.

AN EYE FOR FINER DETAILS

Some loans may also charge an arrangement fee – typically 1% – where others do not or have a fixed fee of AED500.

Loans with lower rates may also come with fixed repayment periods, which may cost you more than a loan with a higher rate that you can pay back over a shorter period.

When you compare car loans in the UAE, you should consider whether the interest rates are flat or calculated on a reducing basis, as comparing reducing rates with flat rates can be extremely misleading.

Put simply, you must do your homework and compare the different car loans in the UAE before you make your choice.  Make sure you add up all the costs incurred by taking the loan and not only the rate but arrangement fee, minimum salary, early settlement fee etc.

But let's backtrack a little here. The first thing you should do is decide what your budget is and that means how much you can realistically afford from your monthly budget. Step two is picking a car to fit that budget and step three is finding the finance deal.

Don't forget, some banks only lend to reputable companies, so you may be asked to stump up a higher deposit – as much as a third of the value of the car – if they are unfamiliar with your employer.

And remember, when you walk into your nearest dealership to choose a car, you will be directed to a row of desks, where busy salesman are waiting to market their finance deal.

Do the research and ensure you have secured the best loan that fits within your budget. It may delay you getting your hands on the steering wheel of your dream car, but you will be grateful in the long run.

Ambareen Musa is the founder and Managing Director of the online comparison website souqalmal.com