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Payment by instalments thrives in car market.

Summary: Installment loans put customers in the driver's seat

Auto centers give customers the chance to pay off their purchases via installments in response to the increase in auto consumers.A number of auto trade centers have recently introduced the installment method. Hardly known to anyone a year ago, the method has become acceptable to car trade centers in order to cope with the growing demand of customers. Nareman Automobile Company's Suleimaniya office announced that his office would accept payments by installment right from its opening three months ago. The company is an authorized dealer of Arabian Automobiles Company LLC for the sale and after-sale service of Nissan Vehicles in Kurdistan Region. "We sell a lot of cars thanks to this method," said Ja'far Muhammad, company director. "About 75 percent of our cars are being sold by installment." Most of his customers, if not all, are government or private sector employees with regular incomes. A customer has to meet certain criteria in order to pay by installments: Thirty to 40 percent of the total payment should be delivered first; properties like a house or piece of land should be put in a trust until full payment is received by the bank; someone with a monthly wage three times at least more than the money paid in a single installment should become the bailer; and the car must be entrusted to the customer in case the customer fails to pay as agreed. In addition, the customer has to provide a copy of both Iraqi National Identity and Civil Identity, a copy of a ration form, a letter proving residency, and a confirmation letter of employment from an employer. Similarly, the bailor should also provide all of these copies and confirmations. Payment by installment is regulated through private banks. For instance, Nareman sells through the Iraqi Middle East Investment Bank (IMEIB), founded in 1993. The bank charges 16-percent interest on a car for two years. Thus, a customer will pay the first installment, 40 percent of the total price at the office of the car trade center, and after that he or she will go to the bank to submit an application, and then have two years to pay in installments. But if the customer is able to pay the rest of the money the next month after the deal, for example, he or she still has to pay the full interest the bank has charged for two years.For banks, it is somewhat of a competition in an open market, with no government regulations, to attract car trade centers. Therefore, interest rates differ from one bank to another.Hadi Muhammad Faraj, the owner of Milano car trade center, said that there is no government regulation for the banks when it comes to interest, and his car center will not benefit at all from the interest the banks put on selling cars by installment. "It takes some time to find a bank to deal with," he noted. But he said that he is still looking to find a bank. Faraj admitted that sales at his center have declined since other centers have introduced the installment method. "We have decided to have the installment method to compete with others," said Karwan Tahir Abdullah, owner of Shwan car trade center, the oldest center in Suleimaniya at 40 years. "But our Erbil branch has recently stopped installment because it does well with selling by cash," he added. Brwa Baqi Muhammad, assistant manager of Darya car trade center, said that since they introduced the new method they "have had an increase in customers by 30 to 40 percent." The private bank it sells through is Ashura Bank. It tacks on 18 percent interest, which should be paid back within two years. Ashura Bank recognizes and accepts properties outside the city of Suleimaniya.As one of the conditions of payment by installment is to put in trust a house or a piece of land until full payment is completed, many of the private banks do not recognize properties located in other places in Suleimaniya province except the city. Diyar Diler, manager of money transfer service at the IMEIB, said that his bank has stopped recognizing properties outside the city because "we have to visit a property before it is put in trust, but if the property is outside the city it is far for us to visit." He added: "We have signed contracts with four car trade centers to regulate installment sales for our customers. And we make a profit from what we do." Asked whether his bank has ever lost the track of his customers, he answered that that has yet to occur.

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Publication:The Kurdish Globe (Erbil, Iraq)
Date:Oct 2, 2010
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