Our Guide to Car Loans in UAE
There are over 55 new and used car loans from UAE Banks and our site allows you to search and compare all the different features of a particular car loan and help you find the right one for you. There are important aspects of a car loan to consider before taking one up. If you are from Continental Europe, there are quite a few differences such as downpayment, salary transfer etc.
What should you know when comparing car loans in the UAE?
There are different criteria will dictate which car loans you are eligible for and which ones would suit you best.
1. New or Used – Once you decide whether you are buying a brand new car from the showroom or a second hand car, you probably will need to finance the car. For used car, banks have a limit of model that they will finance so make sure you check it on souqalmal.com – each car loan has a minimum model displayed.
2. Down payment – As part of setting your budget for a new or used car, you would need to consider the down payment that would be required by the bank for your car loan. Down payment on car loans in the UAE is a requirement and can vary according to
- Are you buying a new car or a used car?
- Are you going to transfer your salary to the bank that will be providing you the car loan? i.e will your salary be deposited from your employer at the bank in question?
- Is it an Islamic product? An Ijarah, which is an Islamic car finance product does not require any downpayment to be made as it is considered as a lease to you and transferred to your ownership at the end of the term.
3. Minimum salary requirement – There is always a minimum salary criteria set by banks on new and used car loans so make sure you look at this requirement when searching for your car loan.
4. Arrangement fee- Arrangement fees or Upfront fees is what a bank would typically charge you at the beginning of the loan as a processing cost – that is after you have accepted to take the car loan and you will have the option to club it with your principal car loan amount or pay if upfront.
5. Early settlement fee – If you take a car loan for 5 years and you decide to pay if off earlier, there is a fee you will be charged by most banks which is typically around 1% or more. Sometimes, they have offers with no early settlement fees but check clearly that this is not applicable only on cash settlement vs refinancing.
6. Flat vs Reducing Rates: There are two ways of calculation of the rate on the car loans that you see advertised by providers - as a reducing rate or as a flat rate so make sure you ask the bank what type of rate is being quoted. A reducing rate means it is the % you pay on your outstanding balance of your car loan whereas a flat is is the % of you pay on the principal amount of your car loan throughout the term. So a loan at a reducing rate of 8% is exactly the same as a loan at a flat rate of 4.41% (the general rule is you divide reducing by 1.813 to get the equivalent flat rate) - So be careful when you compare rates as one bank maybe advertising a reducing rate loan and the other a flat rate loan. If you want more details about how these are calculated, you can read our guide to reducing vs flat rate.
7. Salary transfer: While transferring your salary to a bank to get a car loan is not necessary however, it might mean you get a better rate. The bank will consider a customer with a salary transfer less risky and generally offers a lower rate.
8. Islamic or conventional: If you are looking to finance your car with an Islamic product, you need to search for only products that are Sharia Compliant. Make sure you ask your bank whether they offer Islamic financing.