auto financing in pakistan

7/29/2019 auto financing in pakistan

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Marketing of banking

products & services

GROUP MEMBERS

M.FURQAN YOUNAS M10MBA007MUHAMMAD AHMAD M10MBA022 JUNAID ALI SULERI M10MBA006

NABEEL TAJ GHORI M10MBA027

INTRODUCTION

• Auto finance arose because the price of carswas out of the reach of individual purchaserswithout borrowing the money.

• The funding for personal car finance isprovided either by a retail bank or a specialistcar financing company.

• Some car manufacturers own their own carfinancing arms, Such as ford with the fordmotor credit company

DEFINITION

• The financier finances for

acquisition of vehicle whilepayment is to be made in equalinstallments comprising of bothprinciple and interest of the periodfor which a vehicle is financed.

TYPES OF AUTO FIANANCE

• For individual customers

• For Business Sectors

DECISION MAKING FOR GRANTING

AUTO FINANCE

ARE YOU

GET TO MAKE YOUR DECISION

FOR FINANCING

DECISION MAKING FOR

GRANTING AUTO FINANCE

Item Amount INCOME

EXPENSES

$1,500

Utilities $75

Transportation $260

Food $275

Medical expenses $35 Clothing $75

Leisure activities $80

Miscellaneous $50

TOTAL $1,450

SAVINGS $50

STEP 1:Have some knowledge about

customer’s budget

ARE YOU

DECISION MAKING FOR

Down Payment

Monthly Payments

ARE YOU

STEP 2:Setting a down payment

DECISION MAKING FOR

•Credit information

•Public Recordinformation

•Credit Inquiries

•Personal Information

STEP 3:Know customers Credit Conditions &

documentation

RULES ANDREGULATIONS FOR

SECURITY ARRANGEMENTS BY BANK

• The vehicles financed by thebanks shall be properly secured

by way of hypothecation.• Payments against the sale orders

will directly be made to themanufacturer/authorized dealer

by the bank • Upon delivery, the vehicle will

immediately be hypothecated tothe bank

DOWN PAYMENTS & MAXIMUM

PRICE FINANCED

Down payment does not fall below 10% of the value of vehicle.

• Further, banks shall extend autoloans only for the ex-factory taxpaid price fixed by the carmanufacturers.

• In other words, banks cannotfinance the premium charged by the dealers and/or investors overand above the ex-factory tax

paid price of cars.

INSURANCE COVER FOR

VEHICLE FINANCED

• The bank shall ensure that the

vehicle remains properly insuredat all times during the tenure of the loan.

• However, where the bank holds

100% provision against suchloan bank may not obtaininsurance cover for the vehiclefor remaining tenure of the loan.

REPOSSESSION OF VEHICLE

• The clause of repossession in case of default should be clearly stated in theloan agreement mentioning specificdefault period after which therepossession can be Initiated.

• The repossession expenses chargedto the borrower shall not be morethan actual incurred by the bank.

FACTORS TO BE IN MIND

• Your target monthly payments

• Loan term

• Market Finance rates

• Down Payment

• Insurance Cover

• Hidden Charges

DOCCUMETS REQUIRED

• Copy of CNIC.

• Two recent passport size colored

photographs.• Last six months Bank statement(s).

• Residential utility bills (as a proof of residence).

• Business proof required.

• Copy of valid driving license (optional).

• Two references.

• Bank’s Signature Verification form.

DOCCUMENTS REQUIRED

• Copy of CNIC.

• Two recent passport size colored photographs.

• Last six months Bank statement(s).

• Recent salary slip.

• Employment certificate.

•Residential utility bills (as a proof of residence).

• Copy of valid driving license (optional).

• Two references.

• Bank’s Signature Verification form

AUTO FINANCE CALCULATOR

FOR CUSTOMERS

BENEFITS

• An auto loan will give you the advantage of buying avehicle with monthly payments you can afford.

Auto loans also help build your credit rating, providedthat you make the payments on time,

that may have been too expensive if you were to pay cash.

Insurance company will cover the damages undermotor insurance and liability insurance covers

DISADVANTAGES

• Auto loan requires the customerto pay interest in addition to theprincipal, effectively raising thetotal cost of the car above thesticker price.

• Your interest rate will depend on

a number of factors, such as

• Your credit history,

• The lending institution

• Economic conditions

DISADVANTAGES

• • Financing a vehicle can make it easy to

bite off more. You might rationalize thehigher monthly payment at the time by deciding to cut back on saving andinvesting.

DISADVANTAGES

• When you finance a vehicle, you'reprobably buying a brand-new or late-modelused vehicle with a relatively high value, so

your auto insurance premiums may also behigher.

• You have to carry higher liability andphysical damage coverage than younormally would to protect its interests.

ADVANTAGES AND

DISADVANTAGES FOR BANK

ADVANTAGES :

SOURCE OF EARNING• RELATIONSHIP MAKING WITH VALUED

CUSTOMERS

DISADVANTAGES :• WAITING FOR PAYBACK OF LOAN

• RISK OF DEFAULT BY CUSTOMER

• REPOSSESSION PROCEDURES

BY COMMERCIAL BANKS

• Following major banks are involvedin auto finance

• HBL

• UBL

• MCB

• NIB BANK

•CITI BANK

• BANK AL HABIB

• SUMMIT BANK

• BANK ALFALAH

ISLAMIC AUTO FINANCE

• IJARAH :It is a rental agreement, under whichthe usufructs of an asset is transferred

to the client on pre-agreed terms andconditions. It is a Shariah Compliantmode of finance, adopted by IslamicBanking system in Pakistan.

ISLAMIC AUTO FINANCE

• Following banks are offeringislamic auto finance:

•Dubai islamic bank

• Meezan bank

• Askari bank

• Bank Alfalah

CONVENTIONAL CAR FINANCE

VS IJARAH

Primary differences Financing leasing

installments rentals

Differences in scheme Purchase in the name of buyer

Purchase in the name of bank

Transfer of risk Risk retained by bank

Down payment Security deposit

No Option of returning thevehicle

Option of return is there

Insurance Under insurance act 1938 Under Takaful

ONCLUSIONIt has opened new door for the banking sector to expand its

business as well as expansion of the business of the automobileindustry. Moreover customers can get their desiredautomobiles in a convenient manner which facilitates cashflow management and tax advantages .

auto financing in pakistan

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