Road to Ownership: Hassle-Free Car Financing Options in Oman

The demand for car finance in Oman is encountering a notable rise, propelled by several socio-economic factors. One key driver is the growth in disposable income among Omani residents. The average monthly income for Omani nationals has surpassed OMR 1,200 in urban areas, making car ownership more accessible.

Also, the rising urbanization rate, with more than 80% of the population living in urban areas, has intensified the requirement for personal transportation. Oman's strategic initiatives, such as Vision 2040, desire to diversify the economy and improve the standard of living, further driving the desire for personal vehicles. The recent influx of expatriates, now more than 2 million, also contributes to the demand for car finance, as many seek to show a stable lifestyle in Oman.

The economic structure of the Oman car finance ecosystem is still evolving, and a report by Astute Analytica projects that the?Oman car finance market is expected to reach a market size of US$ 1,019.4 million by 2032, with a compound annual growth rate (CAGR) of nearly 5.48% during the forecast period from 2024 to 2032.

A brief about the market: -

The car finance market in Oman is also buoyed by inventive financial products and competitive interest rates delivered by leading financial institutions. Major players such as Oman Arab Bank, Bank Muscat, and Alizz Islamic Bank have presented flexible loan terms, with repayment periods extending up to 7 years. These institutions offer attractive loan-to-value ratios, with some banks delivering up to 100% financing for new cars. Also, the average approval time for car loans has been decreased to just 48 hours, making the procedure more convenient for consumers.

Technological advancements, such as digital customer service and online loan applications, have facilitated the borrowing procedure. The introduction of Sharia-compliant finance products has also catered to the preferences of a substantial portion of the population, boosting the market's growth.

The car finance market is noticing a surge in demand for electric vehicles (EVs), driven by government incentives and environmental awareness. Oman has witnessed a 30% year-on-year growth in EV registrations. The government’s subsidies for EV purchases, along with the establishment of more than 50 new charging stations across the country, are enabling more consumers to opt for greener options.

Prominent car dealerships, such as Saud Bahwan Automotive and Moosa Abdul Rahman & Co., are expanding their EV offerings, further stimulating the market. The introduction of new models by manufacturers like Nissan and Tesla has also attracted consumers, with Tesla's Model 3 becoming one of the top-selling EVs in Oman. The combination of financial support, environmental commitment, and inventive vehicle alternatives is driving strong growth in the car finance sector.?

Government initiatives to promote economic diversification and financial sector growth

Government initiatives to facilitate economic diversification and financial sector growth are important for shaping Oman’s car finance market. One of the significant steps taken by the Omani government is the Vision 2040 plan, desired to lower the country’s reliance on oil revenues. This plan includes different reforms to boost non-oil sectors, including the financial sector. In recent years, Oman has noticed the establishment of new financial institutions, with the number of licensed banks in the country reaching 20.

Also, the Oman Investment Authority established the Oman Future Fund to attract foreign capital and boost investments in local SMEs, improving financial growth and stability. The government has also prioritized the development of infrastructure, with investments in projects like the Duqm Special Economic Zone, which spans 2,000 square kilometers. This economic diversification is anticipated to boost disposable incomes and, in turn, the demand for consumer financing, including car loans.?

Another significant initiative is the introduction of regulatory frameworks to secure financial stability, such as the Capital Market Authority’s efforts to support corporate governance. Moreover, the government has invested in improving digital infrastructure, with internet penetration reaching 98.6%, enabling online banking and digital finance solutions. The Central Bank of Oman has also played a key role by implementing monetary policies desired to maintain economic stability, with the Omani Rial pegged to the US Dollar at a rate of 0.3845. These initiatives collectively form a conducive environment for the growth of the car finance market, making it more attractive for both financial institutions and consumers.

Increasing Collaboration Between Banks and Automobile Dealerships For Financing Solutions

The growing collaboration between automobile dealerships and banks for financing solutions is a significant trend in Oman’s car finance market. This trend has been boosted by the rising number of car dealerships, which has reached more than 150 in the country. Many of these dealerships have formed partnerships with leading banks to offer customers on-site financing alternatives. For instance, Bank Muscat, one of Oman’s largest financial institutions, has established tie-ups with several dealerships to deliver tailor-made car loan packages.

These collaborations have led to substantial growth in the number of car loans approved, with an estimated 60% of new car buyers opting for dealership financing. Also, the average loan tenure offered via these collaborations has increased to 5 years, making it easier for consumers to manage their finances.?

The comfort of obtaining financing directly at the dealership has also contributed to a higher loan approval rate, with some dealerships reporting an approval rate of 80%. Moreover, these partnerships usually come with promotional offers, such as and zero down payment, attracting more customers. The integration of digital platforms has further facilitated the procedure, with many dealerships delivering online loan applications and instant approvals. This has led to a decrease in loan processing time, now averaging 3 days.

Also, the collaboration between dealerships and banks has enhanced customer satisfaction, with surveys indicating a 90% satisfaction rate among customers who opted for dealership financing. These developments underscore the significance of bank-dealership collaborations in propelling the growth of Oman’s car finance market.

Recent Launches: -

In 2024, as part of its efforts to satisfy customer requirements by providing Shari’a-compliant financial solutions, Alizz Islamic Bank announced a special Ramadan offer for auto finance. The offer includes attractive profit rates; no salary transfer need; and customers making their first payment after 2 months of purchasing new or utilized cars during the campaign period. The proposal is available to all individual customers – Omanis and residents -? from semi-governmental, public sector, or private sector institutions. It is also available for customers who will benefit from the auto finance offer through post-dated cheques (PDCs) without the requirement to transfer their salary. The customer will make their first installment after 2 months.

Similarly, the bank also announced a waiver of all processing fees for any eco-friendly auto finance deal for a hybrid car or an electric car. Commenting on the launch of the Ramadan campaign, Saif Al Barwani, Head of Retail Products at Alizz Islamic Bank, said: “We continuously seek to understand the market and meet our customers’ requirements. Accordingly, we consider the customer needs and develop our offers, services, and products based on an all-around approach to ensure a seamless customer experience journey”.

In 2023, Bank Muscat, the leading financial services provider in the Sultanate, launched an attractive Sayyarati auto finance promotion with the best rates in the market on the occasion of the Holy Month of Ramadhan. The launch of the latest proposal comes in line with the bank’s customer-centric vision and features very competitive short-term rates that start at just 3.49% on both new and pre-owned cars for Omani nationals and expatriates. It must also be stated that Sayyarati has some of the best interest rates in the country including 3.74% for a period of up to 2 years and 3.99% for loan tenors of 3 years and more. Customers can now profit from the offer by applying for the loan online via the added feature on the bank’s Mobile and Internet Banking.

On this special occasion, Abdullah Tamman Al Mashani, General Manager – Products, Bank Muscat, said: “Bank Muscat’s Sayyarati is the most widespread financing alternative in Oman and we are continuously launching new features and attractive rates to allow our customers to purchase their dream vehicles. Bank Muscat is always keen to follow up on the latest expansions in the sector to fulfill our valued customers’ requirements and address their feedback on the services currently delivered.

Closing Note: -

Oman’s car finance terrain is flourishing, propelled by a robust economic framework and growing consumer demand. As the country adopts a more diversified economy and higher urbanization, the demand for car ownership continues to grow. The ongoing advancements in financial products and partnerships between banks and dealerships are making vehicle financing more convenient and accessible than ever before.

Government initiatives, like Vision 2040, are creating a conducive environment for market growth, sustained by enhanced infrastructure and regulatory frameworks. The surge in electric vehicle interest, associated with attractive financing alternatives and technological advancements, is shaping a dynamic and customer-centric car finance sector.

As Oman’s car finance market continues to grow, the commitment to offering innovative, flexible, and Sharia-compliant financing solutions stands as a testament to the industry’s dedication to meeting diverse consumer requirements. Whether people are looking to drive away in a new electric vehicle or a pre-owned car, the burgeoning range of financing alternatives ensures that their journey to ownership is smoother and more accessible than ever before.