How to decide on the best automotive finance

Owning an automobile has gone beyond the tedious process of saving for four years or more. Regardless of your automobile aim, you can now get a car with little financing weight. However, this depends on your ability to analyse and settle for the most suitable auto finance source.

Are you a business owner looking to upscale your mobility and social status with a luxurious automobile or a business owner looking to provide ride-sharing, driving school or courier services, amongst others? There are different ways to get your vehicle financed with little or no stress, especially now that automakers are looking to improve sales, and governments across countries are simplifying automobile access with varying investments.

In this article, I will expose you to the available sources of automobile finance and ways to decide the best finance for your business.

Here are available sources of automobile finance:

• 0% APR/ 0% Interest Rate
• Secured Loans
• Unsecured Loans
• Pre-computed Auto Loans?
• 0% Annual Percentage Rate

There are two forms of 0% Annual Percentage Rate on auto finance, depending on the lending sources: Automakers and Interest-free Islamic Banks.

• Interest-Free Auto Finance By Automakers

0% Annual Percentage Rate is interest-free automobile finance, allowing customers to purchase a vehicle at the value price and spread payment over a specific period without an interest rate. For example, if you purchase a Toyota Hilux 2021 with a retail price of NGN38,015,000 and get a zero annual percentage rate for 37 months, you would repay NGN 1,027,432 monthly.

Automakers such as Nissan, Toyota, Ford Motor, and General Motors offer a 0% APR through their financial arms as a marketing strategy to enhance people’s access to their new and old automobile models. And with this, the automakers sell more and maintain market leadership.?

Apart from the 0% APR offer, automakers also offer customers the opportunity to defer payment for a period or rebate during a financial crisis.?

In 2020, General Motors Corporation offered a 0% Annual Percentage Rate for seven years and deferred payments to customers. Ford Motor also allowed 90 days of deferred payments on new cars to increase sales and assure customers of their support. This increased automobile sales and doubled Ford Motor Corporation’s earnings in the third quarter of 2020, superseding predictions.

In the general sense, interest-free automobile finance sounds like a WIN-WIN approach. However, as it continued, many business experts and customers have faulted it due to its underlying criteria and disadvantages. The allegations include offers restricted to customers with excellent credit rates, limited car models, and deception.

Automakers and dealers only offer 0% APR auto finance to customers with A and A+ credit scores and on limited car models. They do not provide interest-free rates on their best-selling product, and sometimes, they charge more money on the automobile and documentation fee to cover for 0% APR.?

Hence, customers who meet the required criteria must be sure to have bargained the price of the automobile before indicating interest in 0% APR. This would enhance their bargain.

• Interest-free Auto Finance By Islamic Banks

With Islamic banks, such as Jaiz and Taj, an interest-free loan is an Islamic dictate, as interest on loans is considered haram. These Islamic banks pay for an automobile on behalf of their customer and charge a fixed cost plus, representing their profit on the car.

Islamic bank’s auto finance covers a repayment plan for three to four years and requests a guarantor or collateral in case of a payment default.

• Secured Loans

A secured auto loan is protected by the car being financed, and the bank or lender would hold title to the automobile until the payment is completed.

A secured loan often has an extended repayment plan and a low-interest rate compared to an unsecured loan. However, it could lead to the customers forfeiting the automobile due to failure to meet the set repayment plan. You can get your secured car loans with banks or private bodies across Africa.

• Unsecured Car Loan

This is one of the most popular car loans in Africa these days. Banks offer car loans in relationships with auto dealers based on a certain percent interest rate and between 13 to 48 months.

Based on the increasing global interest rates, automobile interest rates have also been affected. Automobile interest rates are higher and have a shorter repayment plan. Hence, when applying for an unsecured car loan, it is always good to analyse your monthly income and automobile objective to ensure that there is enough to cover the cost and interest, as a failure to meet the monthly target could increase interest rates.

• Pre-computed Auto Loans

A pre-computed auto loan prepares the mind of the customers against all amounts to be paid on the auto loan over the agreed period. The interest rate is static no matter the country’s interest rates changes. However, it may likely attract an increase in the late payment rate.

In securing an auto loan, it is always good to be on the safer side. You don’t want to exceed your budget and would like to strike the best deal. Hence, I highly recommend you have the following 5 requirements sorted before deciding on the best auto-finance.

• Automotive Objectives: Carry out the best auto deals research with your objective in mind. Your automotive objective would help you decide and insist on the best deal, even if an SUV is offered as an interest-free automobile.?
• Automotive Budget: An auto loan is not given out based on a surface promise, there is a need for lenders to audit your income as a salary earner against your expenses. Hence, you need to carry out an audit of your income personally to decide on your automobile choice as well as draw out a repayment plan.
• Interest Rates: With the increasing interest rates globally, you will want to decide on the lender with the best interest rates. You may also want to explore the promotional period to strike the best deals. Muslims would want to consider interest-free automotive finance in the lending options to favour religious dictate.
• Value-Added Services: With auto finance, there are different value-added services, such as after sales, rebates, and so on, to explore. Hence, you need to review your options to decide on the best steps.
• Qualitative Automotive Dealer: One of the major requirements for automotive finance in banks is to get a reliable auto dealer. This is because a reliable auto dealer would guide the prospective auto buyer in making the best automobile decision for the set objectives.

At Autochek Africa, prospective car buyers can obtain digital financing solutions for brand new cars and trucks with repayment terms of up to 60 months. Our over 74 banking partners offer both zero percent equity auto finance and the lowest interest rates across East, West, and North Africa.