• Tuesday, April 23, 2024
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BusinessDay

Flexible payment from banks deepens Nigeria car loan market

Innoson-G6-car

Buying a car just got easier for Nigerians who are contending with rising inflation and stagnating incomes with the rising option for flexible payments.

With car loans, a venture which banks and motor companies have picked interest in, a middle-income earner like Nnamdi who lives on N400,000 monthly salary can buy a car from Cars45, a fairly used motor dealer or through the recently launched Access auto by Access Bank and Hyundai or through other car loan products offered by other banks like First Bank of Nigeria.

“I didn’t know there were car loans and flexible payment packages. My colleagues in other companies that got car loans were directly from their company not from a bank or motor company,” Nnamdi, the Lagos-based distribution and factory manager said.

With a10 percent equity contribution, a potential car owner can start their journey of owning a brand new car through the Access auto club. This product offering attracts 18.5 percent annual interest and can be stretched for up to 36 months period (3years).

Read Also: Cheaper cars for Nigerians as tariff crashes

This offer, however, covers only Hyundai cars due to the Motor Company’s partnership with Access Bank.

“Get a brand-new Hyundai from as low as NGN180,000 monthly,” an Access bank advert read.

An all-new Hyundai Elantra is priced from N8 million and N12 million. The price varies because this depends on the version of the car.

But with First Bank and other banks’ auto loans, individuals and businesses can also apply for a car loan to acquire any new car of their dreams. With a 20 percent initial deposit, potential car owners can ride on First Bank’s auto loan product which offers a maximum loan amount of N15 million for a tenor of 48 months (4 years) with an interest rate of 22 percent to buy their own new car.

For the much lower-income earners in Nigeria who may not be able to afford new cars even with a flexible payment system, Cars45 which has as low as N500,000 cars listed on its platform may be the best option. Good thing it, the second-hand motor dealer also offers a payment plan that can be stretched for a period of one year.

“Insufficient funds? Not your portion! Buy your dream car now and spread your payment for up to 12 months with an annual interest rate of 15%,” Cars45 said on its website, adding that “all salary earners and registered business owners are eligible to apply.”

The banks and motor companies contacted for comments were yet to respond.
Although less than Kenya’s average five years tenor for repayment of car loans, Nigeria’s flexible car loan products which offer an opportunity for low-income earners to buy cars has an interest rate that is above its African peers. A challenge for some Nigerians who wished it was lower.

While banks and auto dealers in Kenya and South Africa use the credit score of residents to determine the interest rate they will be paying for car loans, the average interest rate paid in the two countries are a little above 10 percent.

“If the interest rate on the car loans in Nigeria are lower than the figures you mentioned, I think I would have been happier to hear about the car loans and flexible payment system,” a middle-aged lady who simply identified herself as Juliet, who has been saving for two years to buy a car told BusinessDay on Twitter.

To provide fiscal relief to many Nigerians who have been affected by the impact of the pandemic, the Minister of Finance, Budget and National Planning, Zainab Ahmed said the plans by the Government to cut tariff on imported cars from 35 percent to 5 percent is to reduce the rate of inflation.

“One of the drivers of food inflation (the main driver of core inflation is food inflation) is the cost of transportation,” Ahmed said, adding that the reduction in the tariff will enable more Nigerians to bring more trucks for agricultural purposes and be an enabler for the import of more “mass transit vehicles.”

Buhari’s administration slashed levies, including import duties on tractors, transport vehicles, and others, with claims to help further cushion current socio-economic conditions in the country, as contained in the draft 2020 Finance Act.
Vice President Yemi Osinbajo also collaborated with Ahmed’s view about the reduced import levy on car importation as he explained that the new policy will help in cutting down the present high transportation costs which have an attendant effect on the entire economy.

Some analysts have argued that the levy cut on imported cars may hold some good for Nigerians and the economy, others fear the pressure on the crumbling road infrastructure will intensify and it will stiffen the local automobile industry and increase air pollution.