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Which Car Loan Option in UAE is Better - Dealership or Bank

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Whether you are buying a new car or a used one you have two options to choose from; either take care of the full amount by going for a down payment or get a loan from a bank or a dealer. As per a survey conducted by Gulf News, about 60-70% of customers opt to take a car loan in the UAE every year. Deciding on which car financing option is best, a car loan from a dealer or a car loan from a bank can be best made based on a few factors such as whether the car you are purchasing is old or new, dealership offers and credit union. Irrespective of which loan option you opt for, there are a few advantages and disadvantages in both cases.

Bank Financing

Approaching a bank for your car financing can be the ideal option if you have money constraints. A bank will charge you lower interest rates as opposed to a dealer because dealers connect the customer with a lender and to do this they add a separate mark up on the interest rate. Getting a car loan from a bank can be a great option if you want to have access to a plethora of financing options with varying rates and avoid dealer fees as well.

Here are some pros and cons of getting a car loan from a bank in the UAE

                    Advantages

              Disadvantages

1.      You will get several lender possibilities

The bank loan can take a longer time to process.

2.      Many banks provide numerous loan amounts, interest rates, terms and EMI repayment alternatives.

You may be required to physically visit the bank branch and submit all documents.

3.      Features on loans that customers can investigate.

A poor credit score will make you ineligible to apply for a car loan in the UAE.

4.     The customer can choose the bank on your preferences and demands

 

5.      Banks have fixed interest rates for many credit products so you get to pay lower rates. Rates are also negotiable if you have a solid credit score

 

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Financing procedure through a bank

If you are certain you want to take a car loan in Dubai from a bank you will first and foremost need to fit the eligibility requirements as set forth by the bank. Failing to do so will jeopardise your chances for getting an approval. Often banks have a minimum and maximum car loan parameter, check with the bank if this is in sync with what you are looking for.

Be clear about the type of car you are intending to finance. The choice will make or break the right lender for you. It may so happen that your financial situation may improve or worsen over time. A fee-free refinancing lender in such a scenario will help to adjust the loan minus the hefty excess costs.

Lastly, you will need to obtain a car loan quote from the bank. During the preparation of the quote, you can fix the term that suits your monthly budget the best.

Dealership Financing

A car loan from a dealer is the best option for people who don’t have an excellent credit score and don’t have any strong customer relationship with a bank or even a credit union.

Here are some pros and cons of a car loan from a dealer:

                    Advantages

                  Disadvantages

1.      The best option for people with poor credit scores

You will end up paying higher interest rates in the long run

2.      Quicker loan approval process

Fewer options to compare interest rates

3.      Option of a co-signer who can come along with the borrower and make the process a little less complicated

 

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Financing Procedure Through a Dealer

Dealerships partner with online lenders, credit unions and even large banks to give you the car loan through their own financing section. So, you will be able to get your loan financing with a plan from the dealer already prefixed with the lender. In turn, the dealer will take care of much of the complicated process including all the paperwork.

Once your application is approved, you will be redirected to the dealer’s financing division to finally seal the deal. Although this step can slightly differ from dealer to dealer, overall, you will be required to fill out some forms and furnish your income certificate and proof of other assets.

Once this step is complete, a finance manager from the dealer’s office will assist you to review the details of the loan and finally close the loan.

If you are looking for car loan options, both a car loan from a dealer and a car loan from a bank are great options. What makes one better than the other is your profile and requirement. So, shop around and compare the best deals and prices for your car loan in UAE before you make the final choice.

FAQs

Q1. What is a prequalification process?

Ans: If you are planning to take a car loan from a bank or credit union, a prequalification process is a great way to assess exactly how much you will be able to borrow. This is done online and you will need to have handy your savings and income proof, personal details to fill in the online calculator and complete the evaluation process.

Q2. What are the documents I need to submit for getting a car loan in Dubai?

Ans: To get a car loan in Dubai approved, you will need the following documents:

  • Emirates ID
  • Passport
  • Signed AECB form
  • Driving licence
  • Salary certificate
  • Bank statements from last 3-6 months
  • Self-employed individuals will need to furbish trade licence or bank statements
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