What is a Pre-Owned Car Loan in UAE?

What is a pre-owned car loan in the UAE? This is a question that many car buyers in the UAE often ask themselves when considering purchasing a used or second-hand car.

The UAE has a thriving used car market where buyers and sellers come together to agree on a price and close a deal. Buying a used car certainly comes with a lot of benefits, such as the ability to do due diligence and purchase a car that suits your needs. 

Used cars for sale are often in good condition, well-equipped, and more efficient, making them an attractive option for car buyers. In addition to these benefits, used cars are often reasonably priced and you can also take advantage of pre-owned car loans provided by banks in the UAE.

The article below provides a comprehensive overview of buying pre-owned cars in the UAE, covering topics such as what is a pre-owned car loan, how it works, documentation requirements, top banks offering pre-owned car loans, and more. 

What is a Pre-Owned Car Loan in UAE?

A pre-owned car loan is a type of car loan that, as the name indicates, helps you purchase a used car. The loan amount is generally based on the market value of the car, and you are required to make monthly payments with interest until the loan is fully repaid. 

It must be kept in mind that a pre-owned car loan is typically secured with the car itself, i.e., the concerned lender can repossess the car if you fail to make the regular monthly instalments.

Pre-owned car loans in UAE work similarly to new car loans, with the key difference being that the former is specially designed for the purchase of used cars. Obtaining a pre-owned car loan involves qualifying the eligibility criteria, providing the required documents, and applying to a bank or financial institution. Upon approval, you can purchase a used car and start making monthly payments to repay the loan.

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Features and Benefits of Pre-Owned Car Loan

Some of the notable features and benefits of obtaining a pre-owned car loan in the UAE are listed below – 

  • Affordable Interest / Profit Rates: Pre-owned car loans offer competitive interest rates starting from 1.99% depending on the credit score and the bank. Flat or reduced interest rates are also available to make loan repayment easier.
  • Higher Loan Amount: Pre-owned car loans in the UAE offer a higher loan amount, which is based on the car's market value. Most of the top-notch financial institutions offer loan amounts equivalent to 80% of the car's value.
  • Customisable Loans: Banks in the UAE offer customised loan options that cater to your specific needs. For instance, some banks offer Islamic car loans compliant with Shariah law.
  • Flexible Loan Tenure: Banks in the UAE offer flexible loan tenure of up to 5 years for pre-owned car loans. You can decide the tenure and instalment amount as per your budget and planning.
  • Low Salary Requirement: Car loans are affordable and have relatively low salary requirements. You need a minimum monthly salary of AED 5,000 or above to purchase a car through a loan.
  • Early Settlement Option: Most banks offer an early settlement option, which allows you to foreclose your loan account by paying the outstanding balance in a lump sum. Keep in mind that an early settlement fee may apply.
  • Convenient Loan Processing and Approval: Banks provide an online loan application process, with some even offering same-day loan approval. Some renowned banks, however, may take 4 working days to process the pre-owned car loan application.
  • Enhances Credit Performance: Repaying the loan instalments on time improves your overall credit score, which can increase your chances of getting higher loans.
  • Additional Benefits: Some financial institutions in the UAE offer additional benefits such as free car insurance, extended warranties, and roadside assistance with their pre-owned car loans. 

Top Banks Offering Pre-Owned Car Loans in UAE

Given below are some of the renowned banks in the UAE offering pre-owned car loans –

Bank and Auto Loan  Name

Interest / Profit Rate

Maximum Loan Amount

First Abu Dhabi Bank

(Islamic Car Finance Expats)

Flat Rate – 2.49%

Reducing Rate – 4.72%

AED 1.5 Million or 80% of the car value

First Abu Dhabi Bank 

(Islamic Car Finance for UAE Nationals)

Flat Rate – 2.49%

Reducing Rate – 4.72%

AED 1.5 Million or 80% of the car value

Emirates Islamic Bank

(Auto Finance)

For UAE Nationals – 2.15%

For expatriated – 2.29%

NA

Abu Dhabi Islamic Bank 

(Car Finance)

NA

AED 500,000

Mashreq Bank 

(Car Loan)

Fixed Rate – 3.49%

AED 500,000

HSBC

(Car Loan)

NA

NA

RAKBANK 

(Car Loans)

For Salaried Customers - 1.99% 

NA

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Without further ado, let's look at the key features of the above-listed pre-owned car loan to get a better understanding of their offerings – 

Pre-Owned Car Loan 

Features and Benefits

First Abu Dhabi Bank

(Islamic Car Finance Expats)

  • Finance available for new and used vehicles
  • Offer valid for salaried individuals with a minimum salary of AED 7,000
  • Up to 120 days grace period before the first instalment

First Abu Dhabi Bank 

(Islamic Car Finance for UAE Nationals)

  • Minimum salary required – AED 7,000
  • Available for new and used or pre-owned vehicles
  • Only valid for salaried individuals
  • Up to 120 days grace period for the first instalment

Emirates Islamic Bank

(Auto Finance)

  • Minimum salary requirement of AED 5,000
  • Islamic vehicle finance scheme known as Intaleq which is Sharia compliant
  • Fully Sharia-compliant Murabaha structure 
  • Flexible payment plans, extended repayment periods of up to 5 years, and a quick approval process
  • Minimal documentation 
  • Salary transfer not mandatory
  • Finance available for a variety of vehicle brands, including financing insurance, accessories, and VAT
  • A grace period of up to 60 days to start the first instalment

Abu Dhabi Islamic Bank 

(Car Finance)

  • Minimum salary requirement of AED 5,000
  • Competitive profit rates and quick approvals available for both new and used cars
  • Flexible repayment terms of up to 60 months with one yearly instalment deferment
  • First instalment payment grace period of up to 90 days
  • Low contribution and high coverage with ADIB motor Takaful protection

Mashreq Bank 

(Car Loan)

  • Minimum salary requirement of AED 5,000
  • Free current account with no minimum balance and a free-for-life credit card
  • Flexible repayment options with repayment periods of 12 to 60 months on new and used cars

HSBC

(Car Loan)

  • Minimum salary requirement of AED 10,000
  • No mandatory salary transfer to HSBC is required, and no account opening is required either
  • Borrow up to AED 600,000 depending on eligibility for new cars, all types of saloon, four-wheel drive vehicles, and motorcycles
  • Pre-owned cars available with lower down payments and reasonable monthly instalments
  • Concierge Service is available for pre-owned car loans, including a 240-point inspection, accident and service history checks, and vehicle testing and registration
  • Green Car Loans available for electric or hybrid cars, with special rates and discounts

RAKBANK 

(Car Loans)

  • Minimum salary requirement of AED 5,000
  • No salary transfer is required for salaried customers
  • The first instalment is due after 60 days
  • Flexible repayment periods of up to 60 months
  • Finance is available for companies with 2 years or more length of business
  • Finance available for insurance, rustproofing, service and maintenance contracts, and GAP if required
  • No hidden charges
  • RAKdirect 24-hour phone banking support
  • Auto loans are available for new and used cars, sports, and luxury cars

Eligibility Criteria for Pre-Owned Car Loans in UAE

The eligibility criteria for pre-owned car loans in the UAE vary depending on the bank or financial institution providing the loan and the loan product itself. However, some common eligibility criteria include the following:

  • Age: You must be at least 21 years old at the time of applying for the loan.
  • Residency: Only UAE residents can apply for a loan.
  • Income: You must have a minimum monthly income that meets the bank's requirement (usually AED 5,000 or more).
  • Credit score: A good credit score is required to qualify for a pre-owned car loan.
  • Down payment:  Depending on the bank and policy, you may be required to make a down payment of 20-30% of the car's value.
  • Age of the car: Some banks may have restrictions on the age of the car that can be financed (usually up to 5-7 years old).

Documents Required for Pre-Owned Car Loans 

Listed below is the stack of documents required to obtain pre-owned car loans in UAE -

  • Valid UAE residence visa and Emirates ID
  • Passport copy
  • Valid UAE driving licence
  • Vehicle quotation
  • Proof of income, such as a salary certificate or employment contract
  • Bank statements for the past 3-6 months
  • Proof of address such as utility bills or rental agreement
  • Vehicle registration card 
  • Insurance policy for the vehicle 
  • Valuation report of the vehicle 
  • Sale agreement between the buyer and seller of the vehicle 

Note:  Some banks may require additional documents besides the ones mentioned in the list. The requirements may also vary as per the loan amount, the borrower's credit score, and other factors. It is always advisable to check with the bank or financial institution for the specific documents required for a pre-owned car loan.

Factors to Consider Before Applying For a Pre-Owned Car Loan

Keep the following pointers in mind while applying for a pre-owned car loan in the UAE –

  • Loan Amount: Determine the loan amount that you need based on the car you wish to purchase and check whether your chosen bank offers up to that amount.
  • Down Payment: Determine the amount of down payment required by the bank, and ensure the availability of sufficient funds for this payment.
  • Processing fees and Other Charges: Check the processing fees and other charges associated with the loan, as they can significantly add up to the total cost of the loan.
  • Vehicle Condition: Inspect the vehicle thoroughly and make sure that it is in good condition before applying for a loan. Moreover, you should check if the bank has any restrictions on the age or condition of the vehicle.
  • Credit Score: Check your credit score before applying for the loan as it can affect the interest rate and approval of the loan.

How to Apply for Pre-Owned Car Loans in UAE?

Policybazaar.ae is an online platform where you can compare and apply for pre-owned car loans in the UAE. On our website, you can enjoy several benefits such as easy comparison of loan offers from various banks, quick loan approvals, minimal documentation requirements, and more. 

Here are the steps involved in applying for a pre-owned car loan through the official website of Policybazaar UAE

  • Head to the ‘Car Loans’ section on Policybazaar.ae and fill out the lead form.
  • Upon submission, you will be redirected to the car loan quotes page. This is where you can explore and compare the best car loans in UAE and apply for the most suitable one as per your requirements.
  • One of our representatives will contact you and help you proceed with applying for your selected car loan.

The benefits of applying for a pre-owned car loan through Policybazaar.ae include the following – 

  • You can easily compare various loan offers from top-notch banks on a single platform.
  • The loan application process is quick and easy, with approvals granted within a few business days.
  • The documentation requirements are minimal, making it easy for you to apply for the loan.
  • On Policybazaar.ae, you can find loans at competitive interest rates and get the best deals.
  • In case of any query, you can always reach out to our team of finance experts.
  • You can apply for a loan from the comfort of your home without having to visit the bank.
  • The loan application process is transparent with clear terms and conditions, which ensures that you are fully informed about the loan.

Fees Associated with Pre-Owned Car Loan

Tabled below is the general schedule of fees and charges associated with pre-owned car loans – 

Parameters

Fees and Charges

Annual percentage rate (based on a flat rate, which is fixed throughout the loan period)

4.05% - 4.69% per annum

Advance payment of instalment

1% (1.05% inclusive of VAT) of the advanced payment

Early settlement of car loan

1% (1.05% included VAT) of the remaining balance

Processing fee

1% (1.05% included VAT) of the loan amount

Minimum - AED 525 (inclusive of VAT)

Maximum – AED 2,625 (VAT inclusive)

Liability letter

AED 50

Change of due date on standing instructions 

AED 25

Late payment charge

2.10% (including VAT) of the delayed amount

Minimum – AED 50

Maximum – AED 145

Optional courier charges

AED 31.5 (including VAT)

Note: Depending on the financial institution and the policy, the fees and charges are subject to change.

Given below are some 'Frequently Asked Questions' related to our basic question - 'What are pre-Owned Cars'.

Frequently Asked Questions (FAQs)

Q1. What is a pre-owned car loan, and how is it different from a new car loan?

Ans: A pre-owned car loan is a type of loan with which you can purchase a used car. While a new car loan is obtained for financing the purchase of a brand-new car, a pre-owned car loan is for financing second-hand or used vehicles.

Q2. What are the eligibility criteria for a pre-owned car loan in the UAE?

Ans: The eligibility criteria for a pre-owned car loan may vary depending on the bank or financial institution. However, some common eligibility criteria include having a valid UAE residency visa, a minimum monthly income of AED 5,000, and a good credit score.

Q3. How much loan amount can I avail for a pre-owned car in the UAE?

Ans: The loan amount that you can get for a pre-owned car in the UAE depends on several factors, such as the age and condition of the car, your income, credit score, and repayment capacity. However, most banks and financial institutions offer up to 80% of the car's value as a loan.

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