Before committing to vehicle financing, it is important to understand the total cost over the loan period. PHOTO/ROLAND D. NASASIRA
There are various ways to purchase a vehicle, as new and used cars have become more expensive over time due to several factors. When not paid for in cash, vehicle asset financing is a common car acquisition method, including models such as the compact Suzuki Grand Vitara Hybrid.
Emarcent Wabwire, the finance and insurance executive at CFAO Mobility Uganda, explains that vehicle asset financing is a specialised loan specifically for vehicle purchases.
The process begins with the customer selecting a vehicle and obtaining a quote from the dealership. The customer then submits a financing application to the dealership’s partner banks.
Once the bank reviews the application and evaluates the applicant’s financial health, the loan is approved, and the amount is disbursed directly to the dealership. The customer then takes delivery of the vehicle.
The loan is repaid in monthly instalments over a predetermined period, and the bank retains the vehicle’s ownership documents until the loan is fully paid off.
Eligibility
Lillian Kabikire, the business development manager at Absa Bank, notes that eligibility for vehicle financing requires meeting specific criteria. Individual buyers need to provide proof of stable income (such as payslips or bank statements for at least a year), a valid ID or passport, and a down payment of around 10 to 30 percent of the vehicle’s value. Companies must present financial statements from the past year, proof of business registration, tax compliance, and bank statements showing business cash flow.
CFAO Mobility Uganda, in partnership with banks such as Absa, offers financing with benefits such as customizable plans tailored to various financial situations, including extended repayment periods of up to five years or 60 months, depending on the financing partner.
“CFAO’s financing options are flexible and transparent, allowing customers to compare offers from different banking partners,” Wabwire adds.
Penalties
Penalties for late or missed payments typically involve a fixed or percentage-based fee on overdue amounts, and some financial institutions may increase interest rates for prolonged delays. If payments are consistently missed, the bank or dealership can repossess the vehicle. To avoid penalties, customers can set up direct debit payments or reminders. If financial hardship arises, the dealership and its partners may offer options such as extending the repayment period.
“Once all required documents are submitted and qualifications met, financing approval takes about two weeks to one month, including credit checks and loan finalization. After approval, customers can expect to receive the vehicle within a month,” Kabikire explains.
Defaulting
If one defaults on payments midway, the financing institution may repossess the vehicle, with ownership transferring back to the bank or dealership, where it might be resold to recover the loan balance. In some cases, refinancing or restructuring the loan may be possible to avoid repossession, depending on the customer’s financial status.
Before committing to vehicle financing, understand the total cost over the loan period, including interest, and ensure the monthly payments fit within your budget. Expect to make an initial payment and confirm whether insurance costs are included or need to be handled separately. Also, ensure all terms are transparent with no hidden fees before signing.
Wabwire adds that CFAO Mobility through its bank partners, can arrange for flexible financing plans tailored to various customer needs, including extended repayment periods of up to 96 months to allow for lower monthly payments. Depending on the customer’s financial situation, the initial down payment can also be adjusted, starting from as low as zero percent of the vehicle price. CFAO works closely with customers to design financing solutions that fit their financial capabilities.
Insurance
Esther Nakabuga, an Insurance Financial Advisor, emphasizes the importance of insurance in vehicle asset financing. Since financed vehicles are valuable assets on the road, they need protection against risks such as accidents, theft, or vandalism. Insurance provides compensation to the client, covering personal belongings stolen from the car or medical costs in case of injuries to the driver or third parties in an accident.
Options
Financing options vary by vehicle type. New cars such as the Suzuki Grand Vitara Hybrid come with competitive interest rates and flexible repayment terms, while certified pre-owned vehicles can be financed at lower rates over shorter terms. Businesses can access fleet financing with discounts on bulk purchases.
Kabikire says all new vehicles from CFAO Mobility come with a manufacturer’s warranty of three years, covering major repairs and replacements which is further value for the customer investing in the product.
Alternatives
What if financing is declined?
If financing is declined due to poor credit history, the bank will issue a formal notice explaining the reason and may offer suggestions for improving credit, such as paying down existing debts or disputing credit report errors.
The dealership may also suggest alternative financing options, including working with other banks or lenders with different requirements. In some cases, a larger down payment or a guarantor with better credit can help secure financing.
