The new auto loan scheme introduced by the government has met with an enthusiastic public response, the Ministry of Industries, Mining and Trade’s public relations office said in a public statement.
The auto loan ceiling has been set at 250 million rials ($7120 at market exchange rate) with an interest rate of between 16-18%. The payback period has reportedly been reduced from a maximum seven years or 84 installments to four years or 48 months, IRNA reported.
The loans are meant to help boost the auto industry, which had been on the verge of collapse as the public refused to purchase cars due to low quality and high prices.
The high reception has lifted the spirits of the officials, auto managers and workers affiliated to the auto sectors.
“We are certain that Iranians decide by keeping national interests in mind and the defamatory efforts of certain groups trying to spread disappointment will not amount to anything,” the statement reads.
In the two days since the new auto loan applications have been received, over 40,000 individuals had applied for buying cars. Iran Khodro Company, the country’s largest car manufacturer, has had 20,000 requests: 40% of customers have applied for Peugeot 405s, 30% for Samands and the rest for Peugeot Pars, L90 (Dacia-Logan), Peugeot 206 and Dena.
Iran’s second largest carmaker, SAIPA group, has also had over 19,000 requests: 70% of customers have applied to buy Pride and Tibas, and the rest has applied for L90 and Zamyad pickups.
Loan to Cover More Models
SAIPA plans to extend the new auto loan to a wider selection of its cars.
Reza Taqizadeh, the company’s vice president for sales and marketing, stated that the 250-million-rial loan will be officially extended to Brilliance, Tondar Pickup (Dacia Logan) and the Nissan Pickup as well, according to Eghtesad Online.
Taqizadeh pointed out that the interest rate of the loan ranges from 16-18% depending on the car value and people wishing to buy them should refer to SAIPA dealers. He added that the maximum repayment period for the loan is 84 months and buyers must back up their monthly payments with bank checks.
Several other models, which were not initially included, have now been added to the loan scheme, such as cars made by Bahman Group, Kerman Motors and Modiran Khodro.
7 Years Repayment Switched to 4
Car buyers across Iran are complaining that the auto loan extended by the government and backed by the Central Bank of Iran to purchase domestic cars, is not being offered as previously advertized.
As of 7:30 a.m. on Tuesday, car buyers were complaining that the car companies offering the loans have shortened the repayment period from seven to four years, according to Eghtesad Online.
According to the report, many of the would-be car owners entering the dealerships at the crack of dawn were astonished to see that the small print in the contracts had changed from what they heard about in the news.
One buyer, according to the report, said, “The government does not seem to want to help the Iranian car buyer, because of the different prepayment check periods of 3, 8, 12 and 16 months.”
According to the new regulations, the maximum repayment period for the loan is 48 months for 250 million rials rather than the previously advertized 84 months.
Auto Loan Not a Long-Term Cure
A financial expert believes that the auto loan may look like a good short-term solution, but the case is opposite in the long run.
Speaking to Persian Khodro on the sidelines of the 21st International Press Exhibition underway at Tehran’s Mosalla Exhibition Center, Leylaz said, “I am worried.”
The economist noted that the auto loan is not a long-term cure for the ailing industry even though it is being sold as that.
“The industry should move in a direction and be able to regulate its monetary and financial affairs, independent of the support of the government and the banks,” he said.
Leylaz pointed to the capacity of producing more than one million vehicles in the country and said people are eager to purchase cars but the fact that a maximum 100,000 vehicles are to be sold under these conditions may give rise to public expectations that the automakers should offer other products as well with the same conditions.
“There is a chance that demand might relapse to the conditions prevailing before the loans were granted, which will only add to the troubles of the industry,” he said.
According to Leylaz, the campaign “Say no to local cars” was not the main reason why the auto industry was stagnant, rather public expectations had risen after Iran signed the historic nuclear deal with the world powers.
Auto Loan Key Facts
* Loan remains fixed at 250 million rials
* Over 40,000 people applied for loans in two days
* Buyers must back up offer with post-dated checks
* Some locally-made Chinese vehicles are included
* SAIPA extends loan coverage to light commercial vehicles
* Bahman Group and Modiran Khodro are also included
* 40% of IKCO buyers opt for Peugeot 405
* 70% of SAIPA buyers opt for Pride/Tiba
* Sales offices not offering full seven-year payment plan.
