Auto financing

From:Madiha Maryam

ID: 7698 To: Sir Shariq Ayubi Course: Financial Institutions

Table of Contents

AUTO FINANCING....................................................................................................................1 ..............................................................................................................................................................................................1 FROM:MADIHA MARYAM...................................................................................................................................................1 TABLE OF CONTENTS........................................................................................................................................................2 ACKNOWLEDGEMENTS....................................................................................................................................................4 The history of car loans follows the history of cars.................................................................5 The first automobile finance company was formed.................................................................6 GMAC was only 1 finance company others joined in..............................................................6 Car loans today....................................................................................................................7 Advantages Compared to Leasing..........................................................................................7 Refinancing Benefits.............................................................................................................7 Early Payoff Advantages.......................................................................................................7 10 components of lease rate.....................................................................................................................9 Two types of car leases - open and closed...................................................................................10 BANKING ORGANIZATION IN PAKISTAN.....................................................................................14 Islamic Mode of Financing.........................................................................................................15 Ijarah.......................................................................................................................................................15 Advantages of Ijarah............................................................................................................................15 Ijarah thumma al bai' (hire purchase)..................................................................................................15 Islamic banks......................................................................................................................16 ARTICLES..............................................................................................................................17 2009 Disaster for Auto Industry............................................................................................17

Pakistan auto sales down 46 percent in FY09, Used car sales also on decline due to increase in interest rates........................................................................................................................................................18 Auto Leasing Companies.......................................................................................................20

ACKNOWLEDGEMENTS

I would first like to thank Allah, through whom all things are possible. Secondly, I would like to thank our course instructor, Mr. Shariq Ayubi, for giving us such an interesting project. This has been a great learning experience for me, and I am sure it will benefit us in the time to come. If it were not for his constant support and backing I wouldnt have been able to gather the required information and compile a report focusing on auto leasing. Through this assignment, we have realized that theoretical studies have no meaning until applied to the practical world, and this assignment gave us a clear view of how important it is.

AUTO FINANCING

The world of auto finance has evolved from the early days where you could only get a car loan for twelve months and were required to put 50% of the price of the car as down payment today where you can finance for 84 months with little or no down payment. The reason the world of auto financing has changed so drastically is because the price of cars keeps going up. Without these extended terms and creative finance programs, no one would be able to qualify for a car loan anymore which in turn would put a hurt on the car makers and our economy. With the creative finance terms comes the need for the cars to be better made and last longer. Consumers are taking care of their vehicles better and the manufactures are building a much better machine. The introduction of the import brands into the United States helped in this process. Many of the domestic car makers are also forming joint ventures with car companies overseas to learn better ways to build their vehicles. Still, auto financing is more of a need today than ever before. Without finance companies and lenders offering these extended terms and requiring lower down payments, we would never be able to buy these expenses vehicles. Think about having to walk into a dealership and just writing a check for a low end vehicle. If we were back in the 60's, you could only finance that $15,000 vehicle you are buying for 12 months making your payments well over $1,000 per month. Not only can you get a car loan today for a much longer period but the lenders have come up with very creative loan products to help reduce your monthly output. Leasing became popular in the late 80's where you only have to pay for a "portion" of the vehicle. Lenders got burned however with this product in the late 90's when it came time for consumers to trade and the car was not worth their original estimates. Yes, auto financing has changes over time but is still a necessity of everyday life. You can find out more about car loans and the ins and outs of car financing at OpenRoad Lending.

The history of car loans follows the history of cars

Everyones heard of Henry Ford he invented the first automobile, right? Wrong. The first automobile was actually invented by a Canadian from Oshawa, Ontario, Sam McLaughlin. He went into partnership with American David Buick to mass-produce McLaughlin-Buick vehicles, preceding the Model T by about a year. Subsequently, car registration climbed from 178 in 1903 to just over 2,000 by 1908. That number had tripled within 2 years, but the horse and buggy were still the most common forms of transportation. Then an extraordinary salesman and entrepreneur, William Durant, entered the fledgling automobile industry. William Billy Durant founded General Motors. Building on his success with a single automobile, he was the first to assemble a group of automobile companies, including McLaughlin-Buick, under a common management, and he was the first to introduce automobile financing car loans. He even made a bid to buy Ford Motor Company and it was a done deal, except for the bankers distrust, which caused the deal to fall through. Billy Durant was a legend in the automotive

industry and was inducted into the Business Hall of Fame in April, 1996. Hes also honored at the Automotive Hall of Fame in Dearborn, Michigan.

The first automobile finance company was formed

Billys success is ironic because he didnt really care for cars. He thought they were smelly, noisy and frightening to animals. However, being the salesman he was, he realized there could be a good business in selling them. So lets look at why car loans were invented. In the early days of the motor vehicle industry, dealers had to pay cash to stock their inventory, so they could only buy a few cars at once. Then, with the onset of the assembly line, manufacturers wanted dealers to buy vehicles in large quantities so they could keep the factories running regularly. The only way to do this was to make it possible for consumers to finance their vehicles so the dealers could, in turn, finance the vehicles they bought from the manufacturer. So Billy gave ordinary people a way to buy a car when the manufacturers of the time, including Henry Ford, believed that financing a new car would be the end of America. Boy, were they wrong! Billy was a man of vision, and his vision of automobile financing materialized in the form of General Motors Acceptance Corporation (GMAC), the first large non-bank financing source for automobile loans. In 1919, GMAC branches were opened in Detroit, New York, Chicago, San Francisco and Toronto. In 1920, they expanded to Great Britain. By 1928, theyd written their 4 millionth retail contract. As the automobile industry expanded, so did the business of car loans. GMACs success in the car loan business was increasing rapidly. Check out the number of retail contracts they wrote, and how much they earned:

1958: 40 million contracts. 1977: 75 million contracts. 1985: 100 million and earnings of $1 billion. 2000: $1.6 billion in earnings. 2001: $1.8 billion in earnings. 2002: Nearly $1.9 billion in earnings.

Since its inception, GMAC has provided more than $1 trillion of financing for 150 million cars and trucks around the world. Theyre now in 41 countries. Does that give you some idea of the massive size of the car loan industry today?

GMAC was only 1 finance company others joined in

GMAC definitely led the way in the car loan business but, of course, the other major manufacturers recognized the profitability and entered the market. These companies are known as captive finance companies; thats simply a term to signify that the lending company is wholly owned by the automobile manufacturer. Examples, other than GMAC, are NMAC (Nissan Motor Acceptance Corporation), Ford Credit (Ford Motor Credit Company), Chrysler Credit (Daimler-Chrysler). The car loan industry was indeed profitable and, as usual, there are always companies looking to increase profitability. Commercial banks were no exception theyve entered into the extremely competitive car loan market, and are increasingly standing tough against the challenge from the below-market rates offered by the financing subsidiaries of the captive finance companies. The Federal Reserve Board in the U.S. reports that commercial banks controlled 43% of all auto finance loans outstanding.

And now, independent companies are joining the rush. One example is PeopleFirst Inc, founded in 1995 and based in San Diego, California. Capital One, the credit card provider, recognized PeopleFirsts success and snapped them up. PeopleFirst changed its name to Capital One Auto Finance in June 2003, and now its the largest Internet auto lender.

Car loans today

Today you can get a car loan at a dealer, or you can join the hundreds of thousands of people who apply online for their car loan. The process is the same your credit history and credit score are checked, along with your current and past personal information, and a decision is made by the lender whether youre willing and able to repay the loan. And in regards to applying for that loan, well close with a quote from Billy Durant: Forget past mistakes. Forget failures. Forget everything except what youre going to do now and do it. Thats a fitting statement youve got the education; now just go and do it!

What Are the Benefits of an Auto Loan?

Laying out a large sum of cash to purchase a car outright can place a huge burden on your checking or savings account. An auto loan will give you the advantage of buying a vehicle with monthly payments you can afford. Auto loans also help build your credit rating, provided that you make the payments on time, and give you the opportunity to buy a better vehicle that may have been too expensive if you were to pay cash.

Advantages Compared to Leasing

With an auto loan, each monthly payment you make goes toward eventually owning the vehicle yourself. When the loan is paid off, you own a piece of property. In a lease agreement, you rent a car for a specific time. At the end of your lease contract, you have the option to buy the vehicle or return it to the dealer. Auto loans do not limit the amount of miles you can drive the car before incurring costly over-mileage charges, as is the case with a lease. Another consideration is auto insurance. If you finance through a loan, the amount an insurance company will pay for damage depends on the market value of the vehicle. When a leased vehicle is damaged, the dealer's repair costs often are greater than the insurance company will pay, leaving you responsible to cover the difference.

Refinancing Benefits
Many companies will be happy to loan you enough money to pay off your old loan at any time, leaving you with lower monthly payments. Refinancing can save you money if interest rates have dropped since you bought the vehicle, or if your original interest rate is higher due to a previously low credit score that has improved. If you can afford your original loan payment, refinancing at a lower interest rate gives you the opportunity to apply the extra money toward paying off the auto loan faster. Unlike home refinancing, which requires a determination of property value, auto refinancing is dependent only on the amount of money you need to pay off the previous loan.

Early Payoff Advantages

Auto loans that do not charge penalties for early payoff give you the flexibility of ending the credit agreement ahead of schedule, thus saving you money on interest. An early payoff will help improve your credit score, making it easier to secure loans in the future. Completing auto loan payments ahead of time will free up money to pay for other priorities in your budget. Another advantage is to pay off an auto loan with money from another type of loan that has tax-deductible interest, such as a home equity line of credit. An auto loan company requires you to carry a certain amount of insurance coverage for the duration of the agreement. You can reduce the insurance coverage by paying off the loan early and adjusting the policy to more affordable terms.

The advantages of an auto loan or traditional financing are: You are building equity. Once you have completed the term of your loan, you have no more payments to worry about. At the end of the loan term, you are free to sell or trade the vehicle at any time on your own terms. There are no mileage limitations; you can drive the car wherever you want to. The insurance rates are lower on this type of loan as compared to other loan options. The vehicle can be modified, as you want to modify it. Other financing options usually put some restrictions on modifications. : Disadvantages These are usually higher monthly payments. You have to have a down payment either cash or a trade-in. You are buying a vehicle that depreciates the minute you drive it off the lot. How much will it be worth when you are finally done paying for it? After the financial cycle is completed, there could be increased maintenance costs due to the age of the vehicle.

Lease agreement
Lease agreements typically stipulate an early termination fee and limit the number of miles a lessee can drive (for passenger cars, a common number is 12,000 to 15,000 miles per year of the lease). If the mileage allowance is exceeded, fees may apply. Dealers will typically allow a lessee to negotiate a higher mileage allowance, for a higher lease payment. Lease agreements usually specify how much wear on the vehicle is allowable, and the lessee may face a fee if that amount of wear has been exceeded. The actual lease payments are calculated very similarly to the way loan payments are, but instead of an APR, the company uses something called the money factor. At the end of a lease's term, the lessee must either return the vehicle to the owner or purchase it. The end of lease price is usually agreed upon when the lease is signed.

10 components of lease rate

Cost of Funds: At what interest rate does the leasing company borrow its funds? If the bank is in trouble, it may have a high borrowing rate. Lease Term: How long is the lease length? Most leases range from 24-60 months. The longer the lease term, the higher the leasing company's borrowing rate. Leasing companies pass their higher borrowing costs to you in higher lease rates. Residual: How much residual risk is the leasing company willing to take on the equipment? Technology equipment such as desktop and laptop computers, servers and storage equipment support 3% to 12%. The higher the residual, the lower the lease rate and your payment. Resale Market: What is the condition of the used equipment resale market? With businesses failing at record rates, the used equipment market is flooded with repossessed and off-lease equipment. The more used equipment available, the lower the residual and the higher your payments. Equipment Useful Life: If you are leasing long-term manufacturing equipment, your leasing company must understand long-lived assets. If it does not, it will offer you a shorter lease term and higher payments. Deal Size: How much do you plan to borrow? Traditionally the more money you need, the lower the borrowing rate. The lease rate per $1,000 is higher to lease $100,000 than $1,000,000 of equipment. Depreciation: Will the leasing company depreciate the equipment? If not, you will pay a higher lease rate than with a leasing company that can utilize the depreciation. Credit Strength: How financially strong is your company? The leasing credit market is in rough shape now. The Equipment Leasing and Finance Association's (ELFA) monthly Leasing and Finance Index released December 23, 2009 reported that lease application volume for new lease business was down 7% compared to the same period in 2008. Leases over 30 days delinquent are up 15% and one in every three lease applications is declined. Industry Expertise: If the leasing company does not understand your industry, trends and issues as well as the equipment, your application is more likely to be declined. Manufacturer Support and Guarantees: Is the manufacturer guaranteeing the lease? If your company is financially weak, this is good. This guarantee often will gain you a lower lease payment.

Two types of car leases - open and closed

Automobile leases come in two varieties: closed-end and open-end. There's a big difference between the two types and you should understand that difference before you sign your lease contract. Federal regulations require that the type of lease be clearly indicated on all lease contracts. Dealer salespeople typcially don't have this level of understanding of leases. So, don't ask. You'll only get the answer he/she thinks you want to hear. Read the contract form for yourself. Closed-end leases, sometimes called "walk-away" leases, are most common for consumer leases today. This type of lease allows you to simply return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges. Closed-end leases are based on the concept that the number of miles you drive annually is fairly predictable (12,000 miles per year is typical), that the vehicle will not be driven in rough or abusive conditions, and that its value at the end of the lease (the residual) is therefore somewhat predictable. At the time you lease, the leasing company estimates the vehicle's lease-end residual value based on the expected number of driven miles. If the vehicle is actually worth less than the residual when you turn it in, the leasing company takes the financial hit, not you. On the other hand, if the vehicle is worth more than the residual, and you have the option to purchase, you may want to buy the vehicle, then keep driving it or sell it and make a profit. This happens frequently. Open-end leases are used primarily for commercial business leasing. In this case the lessee, not the leasing company, takes all the financial risks, which is not so much a problem for a business, since the cost can be expensed. Annual mileage on a business lease is usually much greater and less predictable than the average 12,000 miles-per-year of a non-business lease. In open-end leases, you are responsible for paying any difference between the estimated lease-end value (the residual) and the actual market value at the end of the lease. This could amount to a significant sum of money if the market value of your vehicle has dropped or you drive many more miles than expected. Often, the residual for an open-end lease is set much lower than for a non-business closed-end lease, which reduces the lease-end risk, but can significantly increase the monthly payment amount.

Consolidated Statistics

Consolidated Statistics / Overview of Leasing Sector

2006
No. of Companies ........................................................ Paid up Captial ............................................................ Reserves .................................................................... Total Equity ................................................................ Investment in Lease Finance ........................................ Investments ............................................................... Borrowings ................................................................. Revenues ................................................................... Operating Expenditure.................................................. Financial Charges ....................................................... Taxation .................................................................... Net Profit ................................................................... Cash Divident ............................................................. Total Assets ................................................................ 29 12,185 8,599 20,784 75,151 21,687 78,882 14,665 5,009 7,419 193 2,044 900 123,501

2007
27 13,182 7,877 21,059 72,908 22,817 83,196 15,028 5,822 8,467 91 636 961 128,315

2008
25 17,448 8,477 25,925 71,597 29,896 90,792 16,907 5,779 8,954 411 2,094 884 136,569

Structure of Financial Sector in Pakistan

Scheduled Banks (47) - Commercial banks - Specialised banks NBFIs - Modarabas - Leasing companies - Mutual funds - Specialised financial (DFIs) - Investment banks - Housing Finance Companies

Specialised Banks

Commercial Banks

Foreign Banks (22)

Domestic Banks (25)

BANKING ORGANIZATION IN PAKISTAN

Pakistans financial sector consists of Scheduled Commercial Banks which include nationalized, foreign, and private banks; and Non-banking Financial Institutions (NBFIs) which include Development Finance Institutions (DFIs), Investment Banks, leasing companies, modarabas, and housing finance companies.

Scheduled Banks and NBFIs (excluding modaraba and leasing companies) are both regulated by the State Bank of Pakistans Prudential Regulations, albeit through different wings, and are subject to different SBP regulatory requirements such as capital and liquidity reserve requirements.

Modaraba and leasing companies are being regulated by the Securities and Exchange Commission of Pakistan (formerly Corporate Law Authority), which is a body corporate.

Compared to commercial banks which cater mostly to short term working capital requirements, NBFIs cater to medium and long term financing needs and, thus, are barred from engaging in any commercial banking activities including trade business and issuing cheques. However, the SBP allowed commercial banks to undertake long term project lending. Among the scheduled banks, only Pakistani commercial banks are listed.

Islamic Mode of Financing

Ijarah
Ijarah means lease, rent or wage. Generally, Ijarah concept means selling the benefit of use or service for a fixed price or wage. Under this concept, the Bank makes available to the customer the use of service of assets / equipments such as plant, office automation, motor vehicle for a fixed period and price.

Advantages of Ijarah
Ijarah provides the following advantages to the Lessee: Ijarah conserves the Lessee' capital since it allows up to 100% financing. Ijarah gives the Lessee the right to access the equipment on payment of the first installment. This is important as it is the access and use (and not ownership) of equipment that generates income. Ijarah arrangements aid corporate planning and budgeting by allowing the negotiation of flexible terms Ijarah is not considered Debt Financing so it does not appear on the Lessee' Balance Sheet as a Liability. This method of "off-balance-sheet" financing means that it is not included in the Debt Ratios used by bankers to determine financing limits. This allows the Lessee to enter into other lease financing arrangements without impacting his overall debt rating. All payments towards Ijarah contracts are treated as operating expenses and are therefore fully tax-deductible. Leasing thus offers tax-advantages to for-profit operations. Many types of equipment (i.e computers) become obsolete before the end of their actual economic life. Ijarah contracts allow the transfer of risk from the Lesse to the Lessor in exchange for a higher lease rate. This higher rate can be viewed as insurance against obsolescence. If the equipment is used for a relatively short period of time, it may be more profitable to lease than to buy. If the equipment is used for a short period but has a very poor resale value, leasing avoids having to account for and depreciate the equipment under normal accounting principles.

Ijarah thumma al bai' (hire purchase)

Parties enter into contracts that come into effect serially, to form a complete lease/ buyback transaction. The first contract is an Ijarah that outlines the terms for leasing or renting over a fixed period, and the second contract is a Bai that triggers a sale or purchase once the term of the Ijarah is complete. For example, in a car financing facility, a customer enters into the first contract and leases the car from the owner (bank) at an agreed amount over a specific period. When the lease period expires, the second contract comes into effect, which enables the customer to purchase the car at an agreed to price. The bank generates a profit by determining in advance the cost of the item, its residual value at the end of the term and the time value or profit margin for the money being invested in purchasing the product to be leased for the intended term. The combining of these three figures becomes the basis for the contract between the Bank and the client for the initial lease contract.

This type of transaction is similar to the contractum trinius, a legal maneuver used by European bankers and merchants during the Middle Ages to sidestep the Church's prohibition on interest bearing loans. In a contractum, two parties would enter into three concurrent and interrelated legal contracts, the net effect being the paying of a fee for the use of money for the term of the loan. The use of concurrent interrelated contracts is also prohibited under Shariah Law.

Islamic Banks in Pakistan

Islamic banks
Dawood Islamic Bank Limited Dubai Islamic Bank Pakistan limited Meezan Bank Premier Islamic Bank In Pakistan AlBaraka Islamic Bank BankIslami Pakistan Limited Emirates Global Islamic Bank

ARTICLES
2009 Disaster for Auto Industry
* Car sales decline in December 2009 on monthly basis

KARACHI: The year 2009 proved a nightmare for the auto industry as the car assemblers volumetric sales fell by 28 percent to 107,704 units, which is the worst performance in last 10 years. This is primarily due to slow down in car financing, as banks were reluctant to issue fresh loans amid risk aversion and chances of higher NPLs due to economic slowdown. Besides higher mark up rates, contraction in disposable income due to higher inflation and heightened security concerns restricted consumers to buy new cars. According to the data released by the Pakistan Automotive Manufacturers Association (PAMA), the auto (cars + LCVs) and car sales for December 2009 are down 15 percent and 19 percent month-on-month (MoM), respectively. Dewan Motors and Indus Motor showing most significant decline, down 36 percent and 32 percent MoM, respectively. This fall was expected on a month on month basis in December 2009, primarily because of delays in consumers purchasing decisions till the next year as they opted to avail the New Years registration, Atif Zafar analyst at JS Research said. This typical trend of declining sales in the last month of the year is reflected in the last 7 years as well. On a year on year basis, overall auto and car sales were up 119 percent and 178 percent respectively. As evident, car sales growth has outpaced LCVs during the period. Moreover, Pak Suzuki registered a 140 percent Year-on-Year (YoY) growth along with 75 percent by Indus Motor as sales had started to bottom out this time last year. Honda Car registered the highest growth (278 percent YoY) because of a low base, as last year Honda was in the process of phasing out the previous model of Honda City to bring in a new one. 1HFY10 numbers show a 16 percent and a 34 percent YoY growth in auto and car sales, respectively. The growth is primarily driven by a 57 percent growth in Indus Motor (INDU). INDU sales jumped during the period mainly owing to low base effect carried from last year (phase out of the previous Corolla model) and a strong performance of Corolla. Despite reduction in FED in budget 2009, car prices remained almost flat in 2009. This was primarily due to consistent cost pressures amid rupee devaluation, rebound in steal prices and increase in sales tax, Furqan Punjani, analyst at Topline Securities said. The sales of Pak Suzuki fell by 44 percent to 51,521 cars in 2009 compared to 92,001 cars sold in 2008. However, only Indus Motors posted volumetric sales growth of 18 percent mainly led by low base affect as the company phased out the Toyota model in 2008. The lower category cars like 800 and 1000cc were hard hit as consumer spending and stringent consumer financing remained depressed through the year. On the other hand, sales of 1300cc and above cars including Toyota Corolla and Honda were relatively better, up 17 percent YoY. This was primarily due to strong institutional buying and low base affect. Car sales rebounded in 2H2009 versus 1H2009 primarily due to low base affect. During 2H2009, total sales recorded at 61,451 compared to 46,253 cars sold in 1H2009, up 33 percent.

However, historical trend shows a contrary picture as 1H of every calendar year proved to be far better for car assemblers due to higher demand from rural areas owing to enhanced liquidity after crop season, he said.

Pakistan auto sales down 46 percent in FY09, Used car sales also on decline due to increase in interest rates
Auto industry: Car sales during first 9MFY09 has dropped by 49 percent year-on-year (YoY), as it stood at 61,185 units as compared to 120,246 units in the same period of the last year, with Pak Suzuki and Dewan Motor among the major losers as both witness sales decline by 52 percent and 76 percent, respectively, figures released by the Pakistan Automotive Manufacturers Association (PAMA) show.

As the macroeconomic indicators are getting better and the economy is on the path of recovery the fiscal year 2009-10 may witness better for the wavering auto industry that has been suffering from sagging conditions since last two years, industry officials told Daily Times.Continued decline in the steel prices in international market and the expected decline in the interest rate would help manufacturers to reduce the prices, they added. However, cumulative auto sales (Cars + LCVs) recorded depressing numbers for 9MFY09 as they stood at 73,668 units depicting a decline of 46 percent YoY. Auto sales were up 15 percent MoM in March 2009 primarly at the back of low base effect from February 2009 (only 23 working days). Honda Atlas and Pak Suzuki were amongst the major gainers as their sales increased by 36 percnet and 21 perecnt, respectively. Moreover, Dewan Motor also showed some improvement with sales up 26 percent MoM. However, Indus Motor failed to post positive growth as their sales declined by 2 percent. After an impressive start in January-09 where MoM sales were up by 95 percent, February-09 auto sales slid by 18 percent MoM to 6200 units, but now in March 2009 the car sales have increased by 14 percent to stand at 6,525 units. Political and economic instability, frequent increase in car prices by manufacturers and high rates of auto financing remained the main sources for this decline, Sales of automobiles have been falling for more eighteen months now owing mainly to the increased rates of interest charged on loans. Besides, the 25 percent high inflation has pushed many potential buyers away. In 9MFY09, Indus Motor captured significant market share at the expense of Pak Suzuki largely on account of their succesful launch of new Corolla model during the period. Indus Motors market share increased to 31 percent from 25 percent in June 2008 while Pak Suzukis market share fell to 54 percent from 61 percent. Similar to Indus Motor, launch of new Honda City helped Honda Atlas Car substantally increase its market share to 12 percent from 8 percent earlier. Automobile manufacturing had boomed when interest rates were low thanks to the increased liquidity available with Pakistani banks after the 9/11 attacks. Banks and leasing companies were liberal in giving loans to individuals. Now, as the numbers of defaults are rising because of increased interest rates, they have tightened their policies. Many banks have even stopped auto financing. There has been hardly any advertisement for car loans on televisions and newspapers for some time.

LAHORE: The sales of brand new and used cars have declined by around 90 percent in the last two months due to high prices and low availability of finance by the banks, the car dealers told Daily Times on Monday. They said that the sales of new, used and reconditioned vehicles have declined due to increasing prices. They said that recent increase by various automobile manufacturing companies have resulted in decline of sales of new cars while tightening of finance by the banks also affected the sales negatively. The local automobile manufacturing companies have increased the prices almost 35 to 50 percent, which pushed up the prices of used and reconditioned vehicles as well. The recent increase in prices of used and reconditioned vehicles also caused a decline in sales, said Rizwan Goraya a showroom dealer of Jail Road. He said that for more than last one month, he had sold only one used and one new vehicle. I used to sell around 20 vehicles in one month but now the sales are drastically down, Goraya said adding that if the trend continues then the showroom owners would have no option but to close business. Another car dealer Abdul Jabbar said that the prices of re-conditioned vehicles have also increased. An imported vehicle that earlier was available for Rs 300,000 is now being sold for Rs 425,000, He said that the next fiscal year could be a better one for the auto industry as besides, positive macroeconomic indicators, government is also going to check the unjustified increase rates by the manufacturers.

Auto Leasing Companies

ORIX

Putting you in the driving seat ORIX Consumer Auto Division offers flexible product range tailored to suit the specific requirements and financial needs of individual customers. We make sure that our product portfolio is in compliance with the cash flow requirements and the changing individual needs of our customers. Our dedicated professional executives ensure that we not only respond quickly to our customers requirements but also provide customized innovation. Our staff has absorbed the spirit of challenge and learning, a trait that contributes to our continuing leadership in this field. There is a lot of wisdom in being with ORIX. Our plans are as easy to understand as road signs.

Salient Features

1. ORIX Consumer Auto Division offers both leasing and financing facilities of vehicles. 2. The following are the flexible product range tailored to suit the customers needs: a. Straight Leases b. Cash Back Leases c. Step up and Step Down Leases d. Balloon Payment Leases e. Leases with Grace Period f. Financing against vehicles 3. An auto lease contract is a non-cancellable contract for a specific period of time, typically from three to five years. 4. The lessee will receive the full benefits of all warranties, guarantees, etc., offered by the manufacturers. 5. The vehicle is insured by ORIX on behalf of the lessee with Pakistans leading insurance companies and ORIXs lessees will enjoy the following distinctive features: No deductible amount on the policy, coverage of terrorism, coverage of life insurance, coverage of third party limited liability insurance. 6. The auto lease comes with a complementary Tracking Device option. Leasing is acceptable within the Islamic modes of financing as fixed rental payments are made.

7. ORIX Branch Network is present throughout Pakistan. 8. ORIX Consumer Auto Division can lease almost all types of vehicles ranging from small to large ones. Just take your pick.

Eligibility Criteria

Any individual who relates to: 1. Business entity from soleproprietorship and partnership to public and private companies. 2. Corporate employees from small and medium-sized enterprises to large corporations. 3. Self-employed persons such as doctors, engineers, architects, lawyers etc. 4. At least 21 years of age at the time of leasing or financing. 5. A resident of Pakistan.

Habib Metropolitan Bank

HMB Auto Leasing

HMB Auto Leasing is offered to all our Commercial & Corporate Clients. Minimum down Payment is as low as 10% of the total amount. Auto lease limit depends on the strength of the Companys financials and credit checks. Rates A Processing fee is charged at 0.25% of the Lease amount. The Vehicle is to be registered in the name of the Bank

The Insurance cost to be borne by the customer.

UBL CAR LEASING: UBL Drive

Downpayment: 15% Used Cars Financing option. Get 75% cash against your car. No Down Payment until approved. No income documents required. Car replacement plans 1 Year free insurance.

Processing Fees: Rs.4000/-

MCB CAR LEASING: CAR 4 U

Option for financing or leasing Financing tenures from 1 to 7 years Options for new as well as used cars Option for local as well as imported cars Financing up to Rs. 20 lacs Option for early payment. Option for Replacement Loan Option for first year insurance financing

CITI BANK CAR LEASING:

10% Down payment 1 to 7 year financing period Upto 12 installments waived

Processing Fees: Rs.4000/-

Bibliography
The information is taken from various articles and websites:

www.orixpakistan.com/general/?id=1 www.hmb.com.pk/AutoLeasing.htm www.leaseguide.com/ www.leasetips.com