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The rising cost of lending due to monetary tightening by financial institutions and the high inflation has left Kenyans with little to spend in purchase of new cars. However Cars45 Kenya has announced plans to change this.
This has been evidenced by the reduced purchases in first quarter of 2023 according to data from Kenya Motor Industry Association (KMIA).
However in an effort to make it easier for buyers to acquire cars players in the auto industry are now introducing new financing solutions to help Kenyans cope with the new challenges.
We talked to Maksym Golubev, Regional Manager at Jiji and Cars45 an online market place for cars on this new development and its potential impact on the ability of Kenyans to now purchase automobiles using the new financing model.
What’s informing this new mode of business?
- Enhanced customer experience: Partnering with financial institutions allows us (Cars45 Kenya) to offer a seamless and convenient financing experience to our customers.
Financial institutions specialize in providing financing solutions, and their expertise can streamline the application, approval, and disbursement process, making it more efficient for car buyers.
- Access to competitive financing options: Financial institutions often have a wide range of financing products and competitive interest rates.
By partnering with them, we can provide our customers with access to a variety of financing options tailored to their needs.
This can help car buyers secure favorable terms and potentially lower their monthly payments.
- Increased affordability and sales potential: Car financing options enable car buyers to afford vehicles that may be beyond their immediate budget.
By collaborating with financial institutions, Cars45 Kenya says it can help customers overcome financial barriers and make higher-priced vehicles more accessible.
This, in turn, can lead to increased sales volume and revenue for the company.
- Reduced financial risk for Cars45.co.ke: When a car buyer chooses financing, the financial institution typically handles the payment to us directly, and the buyer repays the loan to the financial institution over time.
This reduces the financial risk for us, as they receive the full payment for the vehicle upfront and are not exposed to potential defaults or delayed payments from individual buyers.
- Expertise and resources of financial institutions: Financial institutions have extensive experience in assessing creditworthiness, managing loan portfolios, and mitigating risks associated with lending.
Through the partnership between Cars45 Kenya and the lenders, we can leverage the expertise and resources of these institutions to handle the financing aspects, including credit assessments, loan administration, and collections.
- Competitive advantage and market positioning: Offering financing options through partnerships with reputable financial institutions gives us a competitive edge in the market.
It demonstrates that the company is committed to providing comprehensive solutions and a positive customer experience.
This can attract more potential buyers who prioritize financing options when purchasing a vehicle.
How does it operate?
As part of the partnership, we inspect and assess the condition, market value, and authenticity of the vehicles brought to us by sellers or car owners.
- Listing and Marketing: Once the vehicles are inspected and valued, we list them on the website, showcasing detailed information, photographs, and the valuation report.
We also market these vehicles through jiji.co.ke and other marketing channels to attract potential buyers.
- Financing Options: The financing company collaborates with us to provide financing options for interested buyers.
This includes car loans, hire purchase agreements, or other financing solutions tailored to the buyer’s needs.
The financing company evaluates the buyer’s eligibility, creditworthiness, and provides loan offers or financing terms.
- Buyer Selection and Documentation: Interested buyers browse through the listed vehicles on the Jiji Kenya platform and select the one they wish to purchase.
If they require financing, we will initiate the financing process with the partnering financing company.
The buyer will provide the necessary documentation, such as identification, proof of income, and other required paperwork, as per the financing company’s requirements.
- Loan Approval: The financing company will evaluate the buyer’s application, verify the provided documents, and assess their creditworthiness.
Once approved, the financing company will give an undertaking letter.
- Vehicle Transfer and Disbursement: After the financing is approved Cars45.co.ke will facilitate the transfer of ownership to the buyer and the financier.
They will handle the necessary paperwork, including transfer of registration and legal documentation, ensuring a smooth and legally compliant process.
Disbursement of funds by the financing companyis done to Cars45.co.ke or the seller, depending on the agreed terms and conditions.
- Repayment and Loan Management: The buyer will then enter into a repayment agreement with the financing company, adhering to the agreed-upon terms and conditions.
The financing company will manage the loan account, including collection of monthly installments or payments as per the loan agreement.
- By partnering with a financing company, we are able to offer the customers convenient financing options, making it easier for buyers to purchase vehicles from us.
This collaboration has attracted a wider customer base, enhanced the sales process, and provided our buyers with greater flexibility in acquiring the vehicles they desire.
Which specific cars qualify for this new mode of Auto Purchases?
All cars qualify for financing; the percentage contribution of the selling price is determined by the age of the car.
How different is this from the financial institution financing?
The only difference is that Cars45 Kenya are not doing it directly but in partnership with some of the best financial institutions. All have different rates, hence our buyers have different institutions to choose from based on their needs and preferences.
Which financing companies do you partner with?
- Mogo Kenya
- Hakki Group
- Fin Kenya
How different is your consumer financing compared to other companies?
- Streamlined Process: When a company like Cars45.co.ke partners with a financial institution, the financing process is often streamlined and more efficient. Customers can apply for financing while browsing through vehicles on the platform, and the necessary paperwork can be handled jointly by Cars45.co.ke and the financial institution. This collaborative approach eliminates the need for customers to visit multiple locations or deal with separate entities, making the process more convenient and time-saving.
- Targeted Financing Solutions: When a financial institution offers consumer financing independently, their financing solutions are typically broad and cover a wide range of purchases, including vehicles. However, with our partnerships with financial institutions, the financing solutions are tailored to the specific needs of buying vehicles. The financing options are designed to align with the vehicle purchase process, offering specialized terms and conditions that are relevant to the automotive industry.
- Marketing and Promotion: When Cars45.co.ke partners with a financial institution, Cars45 Kenya collaborates on marketing and promotion efforts. Both entities work together to promote the availability of financing options to potential buyers. This joint marketing approach creates synergy, reaching a larger audience and increasing awareness about the financing options offered through the partnership.
- Seamless Integration: A partnership between Cars45.co.ke and a financial institution aims to create a seamless integration of services. The goal is to provide customers with a cohesive and unified experience, where the financing options seamlessly complement the vehicle purchasing process.
Cars45 Kenya ‘s advice to a buyer exploring financing?
- Research and Compare: Take the time to research and compare different financing institutions in Kenya.
Look for reputable lenders that offer competitive interest rates, favorable terms and conditions, and flexible repayment options.
Compare loan products, fees, and customer reviews to make an informed decision.
- Assess Your Financial Situation: Before applying for financing, assess your own financial situation.
Determine your budget, evaluate your income and expenses, and calculate how much you can comfortably afford as monthly loan repayments.
This will help you choose a financing option that aligns with your financial capacity.
- Check Your Credit Score: Your credit score plays a significant role in securing favorable financing terms. Obtain a copy of your credit report and check your credit score. If your score is low, take steps to improve it before applying for a loan. Pay bills on time, reduce outstanding debt, and rectify any errors on your credit report.
- Understand Loan Terms and Conditions: Thoroughly read and understand the terms and conditions of the loan before signing any agreements. Pay attention to interest rates, repayment periods, any additional fees or charges, and consequences of default. Seek clarification from the lender if you have any doubts or questions.
- Seek Professional Advice: If you are unsure about the intricacies of financing, consider seeking advice from a financial advisor or consultant. They can provide insights specific to your financial situation, help you understand the implications of different financing options, and guide you through the decision-making process.
- Negotiate and Ask Questions: Don’t hesitate to negotiate the terms of the loan. Ask questions about any unclear or ambiguous clauses, seek clarifications on fees, and discuss any concerns or special considerations you may have. It’s important to be well-informed and comfortable with the loan agreement before proceeding.
- Read Customer Reviews and Testimonials: Research customer reviews and testimonials about the financing institution you are considering. This can provide valuable insights into the lender’s reputation, customer service, and overall customer satisfaction. Positive feedback from previous borrowers can give you confidence in your choice.
- Plan for Future Expenses: Consider your long-term financial goals and plan for future expenses. Ensure that the loan repayment schedule fits within your financial plans and does not jeopardize your ability to meet other financial obligations or savings targets.
- Read and Understand the Fine Print: Carefully review all documents related to the loan, including the loan agreement, terms, and disclosures. Pay attention to any hidden fees, penalties, or clauses that may impact your borrowing experience.
- Maintain Communication: Once you secure financing, maintain open and regular communication with the lender. Inform them promptly of any changes in your contact details, financial circumstances, or difficulties in meeting repayments. This proactive approach can help address any issues early on and potentially find solutions together.
Remember, it’s essential to be well-informed, financially responsible, and make choices that align with your individual circumstances and goals
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Trends in the car business that informs a buyer to take the financing option
- Rising Vehicle Prices: The cost of new and used vehicles has been increasing over the years. As a result, many buyers may find it challenging to pay the full purchase amount upfront. Financing allows buyers to spread the cost over time, making it more affordable and manageable.
- Increased Vehicle Customization: Car manufacturers are offering a wide range of customization options, from advanced technology features to luxury upgrades. These customizations can significantly add to the overall price of the vehicle. Financing can help buyers access the specific features they desire without compromising their budget.
- Longer Vehicle Lifespans: Vehicles are becoming more durable and reliable, resulting in longer lifespans. Financing options enable buyers to choose newer vehicles with longer lifespans, providing them with an extended period to enjoy their investment while paying for it over time.
- Technological Advancements: Rapid advancements in automotive technology, such as electric vehicles (EVs) and autonomous driving features, are reshaping the industry. These advancements often come with a higher price tag. Financing can help buyers stay up to date with the latest technology and safety features without requiring a large upfront investment.
- Changing Ownership Patterns: Traditional car ownership models are evolving, and alternatives such as car-sharing, subscription-based services, and ride-hailing are gaining popularity. Financing allows individuals who still prefer personal vehicle ownership to adapt to these changing trends while having the flexibility to upgrade or switch vehicles in the future.
- Lower Interest Rates: In some cases, interest rates on car loans may be lower than alternative financing options, such as personal loans or credit card debt. Taking advantage of lower interest rates through vehicle financing can save buyers money over the long term.
- Value Retention: Some vehicles, particularly certain makes and models, retain their value well over time. Financing allows buyers to acquire vehicles with strong resale value, providing them with potential equity or trade-in value when they decide to upgrade or sell the vehicle in the future.
- Incentives and Special Offers: Automakers and dealerships often provide attractive incentives and special offers for financing, such as low or zero percent interest rates, cashback, or discounted pricing. These incentives can make financing a more appealing option for buyers, providing them with additional savings or benefits.