Owning a car and having the convenience of commuting independently is a necessity for every individual living in Saudi Arabia. It not only saves time but also provides comfort and independence. A car is no longer a luxury; rather, it has become a basic need of life. However, not everyone can afford to buy a car as it is a significant investment. Fortunately, with the car loan schemes offered by the government and banks in KSA, salaried individuals can now afford to buy a car. Whether you prefer a new or used vehicle, you can easily purchase it through a car loan known as Murabaha in KSA.
Murahaba is an Islamic auto financing option offered by KSA banks that adhere to Sharia law and regulations. This system enables individuals to purchase a car that meets their transportation needs without compromising their religious beliefs.
Auto financing requires a detailed understanding of the process and careful planning to select the best financing option that suits your budget and needs. Therefore, in this guide, we will help you prepare the essential documents and explore the different banks in KSA, including their rules and regulations.
Criteria to Apply for Murabaha Car Financing
Before understanding the Murabaha car financing and moving forward to planning the car financing, ensure that you fall into the criteria required for Murabaha Financing.
- You must be at least 18 years old to be eligible to acquire a car loan.
- Murabaha financing is for both Saudi and non-Saudi applicants.
- There is no upfront payment to finance a car.
- Your minimum salary should be SAR 3,000 or above. However, if your monthly salary is below 5,000, then you are required to pay a down payment for car financing.
- You must provide an employment certificate to the bank.
- Your installment will also include car insurance.
- An individual with an independent or foreign visa is not eligible to apply for car financing.
- If you are staying in Saudi Arabia without authorization, you are also not eligible to apply for car financing.
Documents Required for Car Financing
- A valid ID (Iqama)
- Valid driving license
- An employer’s letter is stamped.
- Salary certificate stamped by the Chamber of Commerce
- A car financing application signed by a dealership.
Steps to Finance a Car
Follow the steps below to ensure the best auto financing in Saudi Arabia and make a smart investment.
Choose the Car
Firstly, you need to explore the KSA car market and the dealerships. Then, you need to select your desired vehicle from a variety of car models and makes. However, be sure to choose a car that fits your budget and monthly income so that you can secure the best financing.
We have explained the detailed procedure for buying a car, whether used or new, in Saudi Arabia. Our guides can help you make an informed decision when selecting a reliable vehicle.
Read On:
Steps to Buy a New Car in Saudi Arabia
A Complete Guide to Buying a Used Car in Saudi Arabia
Choose the Bank
The most crucial step is to select the bank for auto financing. The following are some of the reputed banks that offer auto financing under different terms and conditions. You need to research each one carefully and choose the one that best suits your requirements.
- Riyad Bank
- Al Rajhi Bank
- Alinma Bank
- Saudi National Bank
- SNB
- Tajeer Finance
- Al Yusr Finance
- Abdul Latif Jamil
Please note that the financing period for a car in KSA typically ranges from one to five years, and financing amounts are capped at SAR 2,000,000.
Maintain Your Credit Score
To secure a reasonable car loan, ensure you have a good credit score by paying all outstanding dues on time. A good credit score will not only help you secure a reasonable interest rate but also allow you to determine the best financing period for your car. Hence, the limit for the financing period is 60 months; you can not finance your car for more than five years, so choose the car and decide on the loan thoroughly.
Understand the Murabaha System in KSA
Saudi Arabia, a Muslim state, provides the Murabaha system for all kinds of financing. This system enables individuals to buy a product through a loan without the riba (interest rate). The Murabaha system is established for Muslim countries, in which the bank and the customer sign a contract to set the cost and fixed profit of the product. As an expat, getting a car financed in Saudi Arabia is the best option.
Sign the Agreement
After understanding the terms and conditions of the Islamic bank you choose, it is time to sign the agreement. To ensure you are well-informed before making any commitment, take the time to thoroughly read the agreement and seek clarification on any terms that are unclear. Discuss the terms, including the car price, profit margin, and total financing tenure with the bank or finance company, and then sign the agreement.
Additionally, you can calculate the total financing cost of your vehicle using the online tool for calculating APR (Annual Percentage Rate). Doing so will help you decide on a monthly payment amount that works best for you.
Note: 1% Management fee is included in the financed amount.
Conclusion
The Murabaha financing in KSA is a popular financing method that offers transparency, flexibility, and interest-free rates. Buying a car and financing it through Murabaha car financing is the best decision for an expat. We hope you found this article informative and made an informed decision through our guide. Buy your dream vehicle with an optimal financing solution and enjoy every ride in KSA with the comfort of your car.
