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7/29/2019 auto financing in pakistan
http://slidepdf.com/reader/full/auto-financing-in-pakistan 1/41
Marketing of banking
products & services
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GROUP MEMBERS
M.FURQAN YOUNAS M10MBA007MUHAMMAD AHMAD M10MBA022 JUNAID ALI SULERI M10MBA006
NABEEL TAJ GHORI M10MBA027
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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
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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.
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TYPES OF AUTO FIANANCE
• For individual customers
• For Business Sectors
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DECISION MAKING FOR GRANTING
AUTO FINANCE
ARE YOU
GET TO MAKE YOUR DECISION
FOR FINANCING
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DECISION MAKING FOR
GRANTING AUTO FINANCE
Item Amount INCOME
EXPENSES
Rent
$1,500
$600
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
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DECISION MAKING FOR
GRANTING AUTO FINANCE
Down Payment
=
Monthly Payments
ARE YOU
STEP 2:Setting a down payment
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DECISION MAKING FOR
GRANTING AUTO FINANCE
•Credit information
•Public Recordinformation
•Credit Inquiries
•Personal Information
STEP 3:Know customers Credit Conditions &
documentation
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RULES ANDREGULATIONS FOR
BANKS
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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
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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.
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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.
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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.
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FACTORS TO BE IN MIND
• Your target monthly payments
• Loan term
• Market Finance rates
• Down Payment
• Insurance Cover
• Hidden Charges
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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.
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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
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AUTO FINANCE CALCULATOR
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AUTO FINANCE CALCULATOR
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FOR CUSTOMERS
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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
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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
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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.
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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.
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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
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BY COMMERCIAL BANKS
• Following major banks are involvedin auto finance
• HBL
• UBL
• MCB
• NIB BANK
•CITI BANK
• BANK AL HABIB
• SUMMIT BANK
• BANK ALFALAH
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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.
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ISLAMIC AUTO FINANCE
• Following banks are offeringislamic auto finance:
•Dubai islamic bank
• Meezan bank
• Askari bank
• Bank Alfalah
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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
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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 .
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