UAE car sales: Will '0% financing for 5 years' deals spark new demand in 2025?

Gulf News

17-12-2024

Dubai: Planning a new car purchase? Then, try out the 0% financing option that comes with it.
Dealerships in the UAE are mounting some of the most eye-catching promotions on new car purchases, with the multi-year 0% financing scheme as another big attraction to go along with the models. Banks too have stepped up their promotions pushing specific brands, again tied to the 0% financing option.
This is what one of the biggest banks in the country had to say about its latest offer: '… auto loans at 0% up to 5 years…' on nearly all models from a popular European auto brand. 'With payments deferred until 2025, this is the perfect moment to make your move,' the bank adds.
It helps potential car buyers that after two years of rate increases, lending rates are finally reversing direction, with the US Federal Reserve already going for two cuts and a third set to follow this week. The UAE Central Bank instantly brings the rate changes once the Fed does its part, which is part of the process to maintain the dollar-dirham peg.
Car dealers in the UAE say that they are fielding more enquiries since mid-November and confident of closing out 2024 on a relative high. 'This December could well be the best for new car sales in the last 4 years,' said a top official at a leading dealership. 'In December of 2021 and even 2022, there was higher demand than now, but there wasn't enough cars available because of the supply problems created by Covid.
'This December, on most new purchases, buyers are getting near instant deliveries.'
The '0% for 5 years' is a recurring theme in this end-of-year promotions.
But buyers should keep in mind that '0% car financing comes with specific conditions,' said Sebastian Fuchs, Managing Director of AutoData Middle East.
'These offers are typically tied to select models from brands like Toyota, Audi, or Volkswagen, and require a mandatory 20% down payment as per UAE Central Bank regulations.
'The loan tenures are shorter, often 3-5 years, compared to standard car loans that can extend up to 7 years.'
Also, additional fees, such as those on loan processing charges, could vary, while some banks even waiving the fees. Eligibility conditions typically includes a minimum salary of Dh5,000+, or salary transfer requirements, depending on the lender.
Car dealerships definitely don't want to see potential buyers delaying purchase decisions, concerned about how they go about the financing. This is where dealers and banks hope the 0% option for an extended term of 5 years will go down well with buyers. And most important, get them to sign the deal now rather than keep waiting.
The other hook that dealers now extend is on free insurance, even allowing for multi-year coverage rather than the typical 1-year that's been the industry norm. Again, dealers are trying to calm buyer concerns about the spike in annual motor insurance, with double-digit increases now the standard practice.
It doesn't matter whether the car owner has a no-claims record, insurance renewals on motor comes with a 10-12% hike.
So, when dealers offer multi-year insurance plus 0% for 5 years, it does help new car buyers get some sort of grip on the costs. 'The sudden increase in motor insurance and the higher price of cars ex-showroom were major factors in the slowdown in demand seen for the most part of 2024,' said a dealer.
'We are hoping to correct that with a strong December and Q1-2025. The initial response to the new model year options are encouraging.'