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High mark up has reduced cars leasing to about 20 to 25 percent during this Ramazan as compared with the sale in last Ramazan. Talking to Business Recorder, car dealers said that higher black money for popular models, uninterrupted import of second hand cars at higher prices and mark up exceeding 17 to 18 percent have all contributed toward the decrease in sales.
Even the rental in Ijarah financing has also remained hovering at around the same mark up rate as are being offered by the commercial banks. Those who have tried to find some solace in Islamic Banking system are not better off even with Ijarah.
Car dealers said that increase in black money for delivery from ready stocks and lengthy waiting period for delivery after booking of cars has made the leasing expensive. One is hardly spared by the dealers or the assemblers if one wishes to lease a car or opts for spot payment of total amount. Even the Islamic banking had no solution to this problem, said dealers.
The import of second hand cars has flooded the market. Many popular brands, in smaller size, are available in varying prices. These range from five to three years old models. It is the luck of a buyer that he gets a good bargain. In case of Mini Pajero, which fetches less prices people have been cheated in a big way.
A dealer said that these clean-looking worn out mini cars are heavy in petrol, expensive in parts, and weak in suspension do give satisfactory service even for six months. In his estimation the number of these mini cars imported in bulk by a few people are still lying with dealers and available on competitive prices.
Dealers said the banks should revise long-term leasing rates, make insurance less expensive and arrange with assemblers for quick delivery of units and make hidden charges known to their customers.
They said that Ijarah financing had attractive features. One of them is that an Islamic bank is partner in loss and profit both, whereas a commercial bank covers its risks only. Car dealers are of the opinion that car-leasing mechanism should be studied once again and possibility of coming up with a product that provides protection to lessees would be most advisable.
They said that increase in mark up would hit car financing in the country. There is need to re-examine rates and come up with affordable proposals. The current decline in the sales of cars through leasing this Ramazan is an indication of difficulties that customers are faced with. The car leasing business, which had given boost to overall consumer financing in Pakistan should be kept at affordable level otherwise there would be further slow down in its demand, said car dealers.

Copyright Business Recorder, 2007

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