Grace Ashiru
Startups offering financing support to Nigerians looking to purchase a vehicle are revising their strategies to maintain stable demand amidst the persistent rise in inflation, which is driving up vehicle prices.
Auto finance companies provide consumers with the flexibility to purchase vehicles from dealers and make payments over an extended period.
However, experts argue that changes in vehicle pricing resulting from the FX crisis and market dynamics have substantial implications for vehicle financing.
Three companies interviewed by TechCabal have stated that they are focusing on financing vehicles in specific areas. This involves evaluating the demand for a particular vehicle, determining its commercial viability, and assessing its affordability for consumers.
“Ultimately, these changes signify the vehicle financing sector’s ability to adapt to evolving market conditions and consumer preferences,” explained Ojurongbe Damilola, head of technical services at Cars45.
Max has a long history of financing various types of vehicles, such as motorcycles, bicycles, three-wheelers, and mini-buses, particularly in the 11 Nigerian states where it operates. To date, Max has financed 33,000 vehicles and has ambitious plans to finance 70,000 vehicles by 2024.
Carima, a B2B marketplace connecting dealers for vehicle requests, has found that financing dealers leads to higher profitability. Since January, the company has financed over N400 million in dealers’ requests and has successfully recovered 100% of the loans. With a network of 3,000 registered dealers and access to 30,000 dealers overall, the platform is poised for continued growth and success in the industry.
Carima provides financing to dealers who view cars as assets, in contrast to the average individual who sees them as liabilities. According to Adebayo Tomiwa, CEO of Carima, dealers purchase cars with the intention of reselling for profit. With a 100% repayment rate, Carima is now poised to expand its services.
As car prices continue to climb, industry experts note that the increasing appeal of vehicle financing is driven by the expanded range of vehicles now available through financiers. Ojurongbe Damilola, from Cars45, informed TechCabal that this broader selection enables consumers to choose vehicles that align with their preferences and financial circumstances.
The increasing number of financing companies entering the market has expanded the financing options available to consumers. As a result, customers now have a wider selection of car loan providers to choose from. This trend has led to a growing acceptance of vehicle financing, with more people considering it a viable option for purchasing cars due to the financial relief it offers.
Damilola noted that the heightened competition among financiers has expanded access to financing for a wider demographic.
The recent decision by the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to raise the benchmark interest rate by 200 basis points to 24.75% has raised concerns about its potential impact on loan interest rates, including those for car loans. This move, which occurred on March 26, 2024, marks a significant increase from the previous rate of 22.75% just a month ago. Given that many financing companies rely on partnerships with financial institutions to access the funds they lend, any adjustment to the base interest rate could lead to corresponding changes in the rates offered by these companies.
