Bank finance of any kind in Nigeria can be a daunting prospect. Yet for effective personal or business money management, leveraging (loans) is vital, most especially in the day to day existence of entrepreneurs.

Now, either for pleasure or business, a new car is rightly considered a big deal. For some, it is the major pointer of how well a business or businessman is doing. After all, you would be hard-pressed to do business with a prospect who shows up on your premises in an old car with dodgy air conditioning.

New cars are celebrated everywhere in the world almost completely regardless of the reasons for acquisition. They even smell nice for weeks after purchase and so far, there is not a car air freshener company in the world that has truly, successfully bottled this most memorable of smells.

But in a country where the minimum wage can hardly buy a set of Pirellis on a Tercel, how does the average Joe experience the joy of owning a brand new car? Frankly, he doesn't and so let us look at car acquisition for the not so average Joe.

As it stands, virtually all banks in the country offer new car loans in some form or the other to their customers (please don't go to Citibank to ask for a personal car loan lest you are thoroughly embarrassed before being shown the door).

So, where to go? Over the next few weeks we will break down the different flavored offerings from the different commercial banks in the country and give what we (scientifically) deduce to be the best option available. We will also offer advice on non-bank options, while giving tips on how to get around some of the more stringent conditions attached to car loans by our friendly bankers.

Readers considering car loans must be made aware of the quite significant interest rates being charged on car loans and must therefore prepare to tie their cash-flows to repayments over the next 3-4 years.

It is absolutely essential therefore that exiting car loan arrangements with a bank MUST allow borrowers pay down on the facility before the tenure runs out without a penalty clause of any kind. In other words, if while dutifully paying off a car loan the borrower receives a windfall from a relative who has recently gotten a government appointment, he should be able to pay off the debt without having to pay any extra charges. It is imperative that car loan terms are carefully examined before putting pen to paper.

We will examine which potholes to look out for and avoid in a typical loan offer and hopefully help deliver a smooth ride for prospective borrowers.

 

Ifeanyi Maduka