Doha: Qatar auto finance market is expected to grow at a positive rate in next three to four years, driven by increase in sales of new and used vehicles in the country owing to emergence of new businesses, increasing personal disposable income and expected increase in tourist inflow.
According to ‘Qatar Auto Finance Market Outlook to 2023’ released by Ken Research yesterday, the existing players in the market are expected to move towards digitalisation with focus on streamlining the financing process for both Qataris and expats.
Multiple fintech startups are also expected to enter the landscape which could pose a threat to conventional finance companies and banks. These start ups would primarily work towards developing products to augment the digitalisation of the banking sector. This includes digital payments, online lending, online aggregation and remote banking facilities which will make customer lending process more simplified, further facilitating the car finance market in the country. Banks and Captives are expected to focus and grow their share in the used cars segment, also new NBFCs are expected to enter the competitive landscape to cater to the increasing demand of vehicle financing in the country.
According to Ken Research, the Vehicle Finance Market in Qatar witnessed a slight decline during the period 2014-2018, owing to decreasing new vehicle sales over the same period. The market is in growth stage with vehicle sales beginning to follow a normal growth trend after continued exponential growth till 2014, followed by a rapid decline after that. Trends in the market were largely stimulated by decline in oil prices after 2014 and few other reasons. These trends led to decline of new vehicle sales in Qatar but spurred the growth of used vehicles, especially in passenger cars segment in the country.
The primary lending institutions in the Qatar Auto Finance market include Banks, Captives & Non-Banking Financial Companies (NBFCs). Banks hold a majority share in the market owing to their reliable lending reputation and expansive network of branches across the country. In used vehicle finance, borrowers face greater difficulties in getting the required finance, penetration rate for used vehicles is much lower than the global average of 50.0 percent. Captives and NBFCs are struggled in gaining traction.
Cars accounted for a major share in the number of vehicles financed in the market owing to high volume of SUVs on Qatar roads, while the share of Light Commercial is lower than Cars and higher than bikes. This was due to low preference of bikes by population in Qatar.
Vehicles are financed for different tenures in the market, with the share of loans lasting for 3-4 years the highest. The overall trend in the market is the lengthening of loan terms with car buyers preferring to make payments over a longer period of time to distribute their financial burden evenly over a longer period. Borrowers provide raised interest rates for longer period loans with lower monthly payments. The trend towards longer loan terms is evident both in New and Used Vehicle finance with borrowers opting for longer loan terms years progressively.
