Car Prices Skyrocket, Can Auto Finance Solve The Problem?

Getting a car has gotten more difficult in recent years with the increased price of cars in Nigeria. What could be the reason for the increased price of cars? What are the possible solutions to this problem?

In this article, we’ll explore the reason for the increased car prices in Nigeria and auto financing as a possible solution to the problem of increased car prices. 

The reason for increased car prices in Nigeria

Car prices have risen significantly in Nigeria, making it difficult for people to purchase cars easily. One of the main reasons for this increase is the weakness of the Nigerian naira. The rise of the dollar against the naira has led to higher import duties, causing customs charges to go up. As a result, bringing cars in from other countries has become more expensive. In the parallel market, the Naira trades at N1,350/$, while the Customs Exchange Rate is still at 1405.466. This may prevent the car prices from dropping. In Nigeria, most cars are sold at the equivalent of dollars to naira. Therefore, if the dollar continues to rise against the naira, the prices of cars will likely increase as well. This, combined with the increased import duty, has led to the current surge in car prices.

What is Auto financing?

Auto financing is the process of borrowing money to purchase a vehicle through instalment payments over a predetermined period of time. This process allows individuals who can not purchase cars upfront to get them by spreading their expenses over a certain period of time. That way, getting cars becomes more accessible. 

Pros and Cons of Auto Financing 

Although Auto financing might seem like a good way to get cars, it also has its disadvantages. Here are some of the pros and cons of Auto financing.

Pros

• Auto financing makes the purchase of cars accessible to people who cannot buy cars outright.
• Auto financing helps break down the purchase price into manageable monthly payments.
• It gives you access to better cars. You might not have enough saved for a brand-new car, but auto financing allows you to consider a wider range of vehicles, potentially improving safety, reliability, and comfort.
• Auto financing often simplifies the car-buying process. Dealerships may collaborate with lenders, streamlining the application and approval process.
• Making timely loan payments can positively impact your credit score, and a good credit score would make it easier to secure loans for other purposes in the future. 

Cons 

• With auto finance, in the long run, you’ll likely pay more than the actual price of the car due to the interest rate of the car.
• Missed or late payments can damage your credit score and lead to repossession of the car. So you have to ensure the monthly payments comfortably fit your budget.
• During the loan term, the car still belongs to the original owner. This restricts certain actions, like selling the car freely.
• Interest rates on auto financing in Nigeria can be high. Carefully compare rates from different auto financing lenders to get the best deal. 
• The car’s value decreases over time, even while you’re still paying off a loan that reflects its original price.
• Auto financing can also become a burden for some people. The combination of monthly payments and interest fees can cause a strain on their financial stability.

Can auto finance solve the problem of increased car prices? 

Car prices are currently high and auto financing doesn’t make them any cheaper. It’s like cutting a cake into smaller pieces – you still end up consuming the whole cake! Auto financing merely allows you to pay for the car in instalments every month, but you still owe the full price along with additional fees. With expensive cars, these fees accumulate even faster.

However, the good news is that if you purchase a car that you can afford, auto financing can ease the burden of paying for it upfront. This way, you can pay for the car over a period of time.

Conclusion

Auto financing can be a helpful option for those who are unable to pay the full price of a car upfront. Rather than paying the entire amount at once, you can spread the cost over monthly payments. However, it is important to keep in mind that you will end up paying the full price of the car along with interest fees. Therefore, it is crucial to carefully consider your budget before deciding to get a car.