Vehicle Asset Financing (VAF) or what is commonly referred to as auto/car loans could be a daunting and complex process without the proper understanding and the right advice to guide potential beneficiaries. In its basic definition, an auto/car loan is a loan given to a person for the purposes of acquiring a vehicle depending on the person’s preference or choice of vehicle. This is not to be confused with personal loans, which are unsecured loans.
Although vehicle acquisition schemes have become very popular in Ghana over the last decade due to the cost of vehicles, exchange rate vulnerabilities, and recent flexibilities in lending parameters, there are many people who find themselves at sea when making decisions about auto loans. In this article, we will discuss some terms and loan structures available to clients who want a vehicle financing facility with a bank.
The very first step before selecting a car model is to decide on the amount you can allocate for such an investment. It is, however, not just a one-time investment. Along with paying a lump sum at the purchase, other expenses including its maintenance, fuel cost, insurance premiums, etc. also need to be factored in. It is therefore important to set an upper limit and decide on a monthly amount that you are willing to spend on the vehicle.
After deciding on the budget, it is equally important to decide whether you want to buy a used vehicle or a new one. Generally, people opt for used cars due to the high cost of new vehicles. However, it is imperative to understand that although a second-hand car may fit in the budget, it can have higher maintenance cost than a new one. Therefore, one must analyze their budget and then plan an estimated cost of having a personal car. This decision must be taken with key considerations to your lifestyle, taste and other specifications such as safety, engine capacity, family size etc.
It is also important to have an estimated idea about the resale value of the car. Due to a powerful engine, brand value, and superior fuel efficiency, some cars have higher resale value than others. Besides, maintenance of the car is one of the major concerns of the buyers, and as such, they should purchase a model which has ample service centres in proximity along with the availability of spare parts.
As financial planning is an essential part of the loan acquisition process, it is important to look out for financial institutions that give ease and comfort. Stanbic Bank, for instance, has alliances and association with vehicle dealerships across the country. The bank and the dealership have an understanding and a relationship which makes processing and acquisition of the loan and vehicle respectively a seamless process. There have been instances where clients have received discounts from dealers because they were acquiring the vehicle through the bank.
Also, because the bank has partnerships with insurance companies through its bancassurance portfolio, Stanbic Bank is able give clients a bouquet of premiums from different insurance companies for clients to choose from. The significant thing about this is that when people are taking premiums, they look at how much they are paying for rather than whether or not the insurance company can pay claims in case of an unfortunate incident.
Through its bancassurance unit, the bank is able to work out these backend issues such as the right insurance company, the right premium and the kind of insurance for the benefit of the client. As noted in the beginning of this article, an auto loan can be a complex endeavour if one does not have a guiding hand. It is always important to talk to a bank for the necessary advice before taking any steps.
The writer is the Head, Specialized Lending, VAF & Mortgages