How effective is auto-financing?

This is because of the growing arrangement between auto dealers and banks to encourage more patronage of their brands. Adisa Adebayo, a Lagos businessman is a proud owner of a brand new car courtesy of this initiative and would tell an one who cares that bank’s auto finance scheme enabled him to join the ‘big […]

This is because of the growing arrangement between auto dealers and banks to encourage more patronage of their brands.

Adisa Adebayo, a Lagos businessman is a proud owner of a brand new car courtesy of this initiative and would tell an one who cares that bank’s auto finance scheme enabled him to join the ‘big club’ earlier than he expected.

‘’The new car is a big boost to my, personality, which will automatically leverage on m small scale business I started few years ago with my last saving. I would have been able to afford to get the car if m bank had not provided me with the opportunity’’

Adisa, is not the only one who has been soaked b the so-called ‘overnight’ opportunity to ride new cars. Man Nigerians, including corporate organizations have keyed into the scheme.

Our correspondent gathered most auto dealers in the country currently have arrangements with banks in order to push their products to the doorsteps of prospective buyers.

Under the arrangement, dealers keep off from the inherent risk in the transaction, leaving the customers to arrange with the banks. An default would also be borne b the two parties

Elizade Toyota Acquisition Plan ETAP offers you a flexible way of purchasing a Toyota Vehicle. ETAP from Elizade makes Toyota purchase easy, pay 10% to 30% of the value of the Toyota car of your choice. The balance will be spread over a period of 12 to 48 months. ETAP is a partnership between Elizade and a number of banks in Nigeria.

Also included in the Elizade Toyota Acquisition plan are: Free 1 year or 10,000km Toyota Service whichever comes first, free registration/licensing and free accessories like Foot mat and C Caution

Also First Bank is organizing a promo in conjunction with Alliance Autos Nigeria Limited through which customers can buy a brand new NISSAN Urvan at zero percent interest for 24 months.

According to the bank, with 20percent down payment, customer can own a NISSAN Urvan and pa the balance over a suitable period at zero percent interest for 12-24months and only 9 percent interest for 36months term.

Sterling Bank Plc has auto arrangements like Sterling car lease, Auto Loan Sterling Acquire, while Diamond Bank Plc some years back had financing scheme that offers customers an opportunity to acquire choice Peugeot cars without paying any interests on the principal.

The bank said cars available in the Peugeot give-away offer by the bank are Peugeot models 307, 406 and 407.

To benefit from the offer, a customers have two options to choose from; he can either make a down payment of 30 percent and pay the balance over 18 months on a zero interest basis; or make as low as 15 percent down payment and earn a N5,000 monthly cash-back which qualifies you for the Diamond SavingsXtra Salary 4Life rewards scheme.

Speaking on the growth of auto-financing, Mr George Albert, a Finance expert, posited that provision of loans b banks to buy cars b customers is in order, adding that the development will enable more people to own a brand new car.

Why auto-financing thrives

Ifeanyi Managing Director of BKG Exhibitions, organizers of Lagos motor show said the renewed interest in auto financing is due to synergy that had been developed between the financial sector and the auto industry players in Nigeria in the recent past.

He explained that this became more evident after the initial setback caused by the global economic meltdown that affected the automobile sector globally.

“The development has afforded the auto dealers the opportunity to increase sales, make many Nigerians to purchase brand new vehicles as against the fairly used ones (tokunbo), which most of us have resorted to due to the relatively cheaper price.”

According to him, organisations were now more able to comfortably replace their fleet without over-stretching their resources.

Besides, a study on the impact of bank reform on the auto leasing industry in Nigeria carried out b General Motors revealed that bank consolidation provided an enzyme for automotive industry survival and growth.

The report also said banks consolidation has vested in automotive industry the ability to foster growth, resulting in profitability, which might have been a mirage without strong banks consolidation.

Auto-Financing not all perfect: Some customers who own their cars through auto-financing lamented that there is more to the scheme than meet the eyes.

Christian John, a civil servant in one of the nation’s oil rich region told our correspondent that the brand new Hyundai he bought through auto-financing scheme recently is a Greek gift to him and his young family.

‘’Initially I thought I was enjoying the new brand before it now dawn on me that I have to cough out several thousands of naira monthly for two years in order to become the full owner of the car. At a time I went borrowing to feed m family in order to meet the monthly target. At the end of the day, I ended paying more money on the car’’.

A Lagos resident, Ade Micheal, also lamented that banks hidden charges is a serious challenge to the auto-financing scheme.

According to him, these charges usually jerk up the cost of the car when the full instalment is finally paid.’

‘’The charges are killing, especial for low income earners like me who desires good car. Bank will deduct all manner of charges and at the end of the day pay more. Also pray not to default in the payment of the instalment. If you do, you will forfeit the instalment to the bank’’.

Finance expert, George Albert opines that many people may not be able to par the monthly instalments due to their level of income.

Albert, who said many Nigerians earn less than N100,000 monthly, wondered how the will use over 75percent of their pay to take care of care loan.

Bankers react.

Most of the banks that operate auto-financing scheme are discreet on giving information on its success or otherwise. This is evidenced on their failure to respond to our enquiries.

However, a banker in one of the new generation banks in Lagos said it is not true that banks impose hidden charges on customers under the auto-financing scheme.

‘’These are charges that accompany the scheme. Every bank packages have charges which are duly stated when a customer is undertaking them. It is unethical for any bank to do that’’.

According to him, the argument over certain some of money customers are remitting monthly holds no water because they are specified before customers undertake them.

He explained that that is why there are various types of auto-financing schemes which give customers opportunity to make their choice in accordance with their capacity.

He said the scheme is a great revolution to the auto and financial sector in the country, adding that man organizations and individuals have subscribed to the scheme in recent time.

An automobile analyst is of the opinion that the scheme is not a bad idea as it has help the auto sector to grow substantially.

He said the bank charges on this transaction should be look into with a view to encouraging more people to key into the scheme.

He also advised the government to consider injecting more fund into the auto-industry as well as create more enabling environment for investors to stake their funds into the sector.