With the soaring prices of automobiles the world over, making a purchase with a credit facility seems like the right thing to do, but it seems that car loans are increasingly harder to get. Read on to see the 3 reasons car loans are now harder to get.
Whether you are buying a new car or a tokunbo (shipped in fairly used cars), there are companies willing to provide you with the credit you need to make a purchase.
You may not have enough money sitting in your savings account to purchase a vehicle outright, and that’s understandable, especially with car prices being so high these days. But unfortunately, you may find that getting an auto loan is easier said than done.
Why buy a car with a loan?
Loans in Nigeria can be used for a lot of things including making property purchases like a home or a car.
However, the choice of opting for a loan for a car purchase depends almost entirely on your income. A car loan is considered a wise decision if you take a debt that is compatible with your income.
Taking too much debt that is higher than your income may plunge you into financial disaster. In such a situation it may not be wise to get a car loan.
It also helps if you have the benefit of using the cash for other productive ventures provided the opportunity cost of using it is higher than the interest that you pay the bank. Opportunity cost can be financial or personal it all depends on your yardstick.
3 Reasons Car Loans Are Now Harder to Get
Whether you are buying the most expensive car or not, the increased cost of living is making it hard getting the financing you need for your next car purchase.
Boosting your credit score and down payment before shopping around can help you qualify for an auto loan.
According to recent findings by Dealertrack Credit Availability Index, auto loans were harder to get in July than in June. Also, car loans in Nigeria have been harder to get this year since approvals peaked in April. Here are some of the reasons behind that trend:
1. Lending has tightened
Recently, banks in Nigeria resolved to further tighten lending conditions following a continued increase in loan defaults by debtor customers.
Even if you’re getting a mortgage, a personal loan, or an auto loan, lenders can opt to tighten their standards and requirements as they see fit.
These days, many experts are warning of an impending economic recession, so some auto lenders are proceeding with caution. After all, the last thing a lender wants is to give out a loan that a borrower won’t be able to keep up with repayments.
2. Higher interest rates
At its September 2022 meeting, the Central Bank of Nigeria raised its monetary policy rate by 15.5%, the highest ever. This figure sits above market expectations of 14.5%.
It marks the third straight rate increase so far this year, bringing borrowing costs to the highest since 2006, amid heightened concerns over the impact of sustained inflationary pressures on the country’s fragile recovery.
Nigeria’s annual inflation rate climbed for the seventh straight month to a 17-year high of 20.5% in August, amid soaring food prices, higher diesel costs, and continued currency weakness due to a chronic dollar shortage.
This has also been reflected in higher interest rates higher for auto loans in Nigeria, thereby making those loans more expensive.
3. Higher down payment requirements
High exchange rates and increased border control are some of the factors that have caused new and used vehicle prices to soar in Nigeria.
That’s challenging enough in its own right, and it’s also been putting pressure on the used car market, making it harder for consumers needing a car to snag a deal.
But because car prices are higher, lenders are requiring larger down payments. And some people can’t afford to make them. If you’re in that boat, then you might struggle to get an auto loan.
How to increase your chances of getting a car loan
While auto loans may be getting harder to qualify for, that doesn’t mean all is lost. In fact, there are some steps you can take to increase your chances of success.
- First, work on boosting your credit score. The higher that number is, the less risky a borrower you’ll present yourself as.
- Next, plan to shop around. Not only might that help you find a lender that says yes, but it might also result in a lower interest rate on your car loan.
- Finally, do your part to save up a decent down payment for a car. A side hustle could be your ticket to checking off that box.
Auto loans have been harder to get, but some borrowers are getting them. And with the right strategy, you could be one of them.
Criteria for getting a car loan in Nigeria
Below is a car loan requirement checklist for non-salary earners:
- Minimum monthly income of ₦150,000-₦250,000
- 4-month Account Statement
- Loan tenure of 12-36 months
Now that you have gone through all the car loan requirements, are you ready to obtain one?
Where to get car loans in Nigeria
Having met the criteria for getting a car loan in Nigeria, there are a number of places you can get a car loan in Nigeria.
Some of them are listed below.
Beta car Financing
Betacar is an e-commerce automotive platform bent on redefining the way car buying should be in Nigeria. Betacar’s loan scheme is referred to as BetaCar Financing – which provides salary earners and structured business owners in Nigeria the opportunity to buy quality certified Tokunbo cars and pay over 12-24 months.
The most interesting fact about BetaCar financing is that your car should be ready for pickup one week after the submission of a complete application package.
UBA Auto Loan
This loan is a product of the United Bank for Africa to provide you with the opportunity to drive your dream car, while you pay back without hassle.
The approved car brands for this scheme include Approved brands are Toyota, Honda, Mitsubishi, Hyundai, Mercedes, Nissan, Ford, Suzuki, Kia, and Volkswagen.
Autochek Financing
Autochek is an automotive technology company that aims to build digital solutions. Auto check Financing makes it buying your choice car convenient for you by allowing you to buy now and pay back monthly.
FCMB Auto Loan
This is FCMB’s consumer credit scheme which allows qualified individuals to the part-finance acquisition of cars for personal use.
Customers can own a car and pay over a period of time. This loan can be applied for on the FCMB loan portal or at FCMB branch locations. The loan is in two categories, namely FCMB Auto loan Alliance and Standard Auto loan.
Cars45 financing
Cars45 brand is a platform that provides you with the opportunity to buy cars online and offline. Cars45 car financing allows you to get a car loan approval within 72 hours and pay for up to 12 months at a 2.5% monthly interest rate.
To qualify for this loan, you have to either be a salary earner or a registered business owner.
FirstBank Automobile Loans
This loan scheme is a product of FirstBank of Nigeria to help you own your dream car within a short time frame. If you are an employee in paid employment, then, this loan is for you.
To get started, download the Auto Loan Application Form on the First Bank website. Complete the form and submit it at the nearest FirstBank branch. Other documents that would be required to process the loan include:
Access Bank Vehicle Finance
Access Bank Plc. has varieties of car loan schemes you can choose from to own your dream car. They include Access More Mileage, Easy Buy Finance with GAC Motors, Hyundai Auto Loan Promo, and AutoClub by Access.
