Luxury car dealers to offer leases

The new approach is to serve consumers who struggle to raise finance or face job insecurity.

Audi is one of the luxury car brands that has now begun to lease cars to credit-starved consumers.

DUBAI // Luxury car dealers are starting to offer leasing options to customers who cannot meet the banks' strict loan requirements, or who have low job security. "We started [leasing] because there's been a big drop in inquiries in sales for expats, both western and Arab," said Tom Pryor, the marketing manager for Ali and Sons, which sells Audi cars in Abu Dhabi and Al Ain. "We feel it's partly because of banks and people not having the down payment or salary criteria, but they're also fearful of committing to a contract." Banks began tightening requirements for car loans at the end of last year as the global slowdown began to affect the Emirates, by increasing the deposit amount, raising interest rates and rejecting candidates who worked in property and other sectors with widespread redundancies. Only a year ago, banks approved most applicants and demand for cars outstripped supply. Many dealers did not offer leasing before because cars were much cheaper in the UAE than in other countries, said Robert Ziegler, the vice president of AT Kearney consultancy in Dubai. "We asked [dealerships] why they weren't offering leasing and they said it was because cars were just so cheap, at 20 per cent less than any other regions," Mr Ziegler said. "Therefore, people preferred to buy or finance. Obviously, that's all changed." Mr Pryor reported a 10 to 15 per cent drop in sales this year so far. He hoped the leasing plan introduced this week, where customers sign up for a one-year contract with the option of buying the car at the end or leasing a new car, would boost sales by 20 per cent. BMW has seen a surge in demand since it introduced leasing for individual customers in the UAE at the start of the year, said Roger Tannoury, the finance and insurance manager for BMW Middle East and Abu Dhabi Motors. "Now there are too many inquiries," Mr Tannoury said. "At least now there are more people coming into the showroom, more telephone calls and more inquiries from companies. It's better now." BMW had offered leasing in the past as a promotion, but as sales stalled, leasing became necessary. Mr Tannoury said sales were 40 per cent lower in the first quarter compared with the same period last year, but so far this year leasing had represented 40 per cent of revenue. Car rental companies, such as Diamondlease and Fast Rent A Car UAE, also started offering lease-to-own options this year. AW Rostamani, which sells Nissan cars through its sister company Arabian Automobiles, began offering corporate leasing with its new division, Shift Leasing, in March last year. Ashish Nanda, the deputy general manager for AW Rostamani, said Shift Leasing had just been a natural expansion of the business. But in recent months, Shift Leasing has received many inquiries from individuals wanting to lease. "They wanted to lease cars because they were finding problems in getting loans," he said. Shift Leasing is considering a leasing plan for non-corporate clients in the coming months, Mr Nanda said. Mr Tannoury, however, said it was not an easy option because of the risk it posed to the dealer. In signing a lease agreement with a customer, the dealer agrees to buy back the car at the end of the term, he said. That car could be difficult to sell and might end up sitting on the lot, leaving the dealer oversupplied. "We are taking this risk because our used-car department is doing fine," Mr Tannoury said. "Not all the dealerships are willing to take such a risk." [e-mail]