Riding on lease
Cheap currency programs of leasing companies could become an alternative to expensive car loans, reads a KW article by Tetiana Ochymovska.
Over the past several months, the number of car financing companies has increased by a minimum of 33%, though compared to the pre-crisis period 50 such companies are still operating. However, potential borrowers are scared of by exorbitant interest rates on car loans.
Since January real interest rates on car loans have fallen by only 2-3%. For new foreign made cars they dropped on average to 19-20% per annum, for domestically manufactured automobiles – 20-21%, and for used cars – 23-25%. Borrowers should not expect car loans with a zero down payment this year. The minimum down payment for car loans will be 15-20% and the maximum financing – 5-7 years.
Buyers of used cars cannot even dream of such attractive loan terms. Most banks offer 3-year loans for the purchase of used cars and the average down payment is around 30% of the price tag. In addition to that, no more than 20 banks issue loans for the purchase of used cars as they are not profitable. Commercial banks much more actively lure potential borrowers by offering them cash loans to buy a car instead of a financing term. The maximum amount of such loans is UAH 75,000-100,000 with a maximum repayment term of up to 3 years.
“Obtaining such a loan is much easier. A borrower does not bear additional expenses for mandatory insurance, notary registration of a down payment and a number of other procedures stipulated by law. In cases of travel abroad or sale of the vehicle, the borrower does not need the permission of the bank. Of course, the term of financing is in most case quite shorter.
However, as practice shows, the average term of car loan repayment is around three years,” says Dmytro Havrykov at Erste Bank. This is precisely how banks advertise their services without mentioning that the minimum rates on such loans range within 32-40% per annum and can be as high as 90%, Ochymovska warns.