What is Car Financing in Nigeria?
Car financing is a payment option that allows you to buy a car without paying the full amount at once. Instead, you make payments bit by bit over an agreed period.
This can either be monthly or quarterly. In Nigeria, car financing is often done through banks, microfinance institutions, or car dealers that partner with financing companies.
In this arrangement, the lender pays for the car first, while you pay them back in installments with interest.
Most times, the car is usually used as collateral until you complete the payment.
Why Car Financing in Nigeria is Important
Owning a car in Nigeria can be a big financial decision, but car financing makes the journey smoother. Instead of waiting years to save up, you can get the car you need now and repay it in a way that fits your budget.
Here are some reasons why car financing is so valuable:
1. Car financing helps you buy a car without paying the full amount upfront.
2. It helps to improve your credit score once you're able to make your monthly payments on time. With this, it's easier to access other loans in the future.
3. With a loan, you can afford newer or more reliable cars that you might not be able to buy with just your savings.
Most banks and cooperative societies allow you to spread your repayments over months or even years.
5. Many lenders include extra perks like comprehensive insurance, GPS tracking, or free servicing for a certain period. These benefits can save you money and keep your car secure.
Different Car Financing Options in Nigeria
There are different ways you can finance a car in Nigeria, and it mostly depends on your income, credit history, and the type of lender you choose.
Some car financing options in Nigeria you can try out include:
Bank Loans
This is the most popular option. Most commercial banks in Nigeria, like Access Bank, First Bank, and Stanbic IBTC, offer car loan packages. They come with structured payment plans and relatively lower interest rates compared to microfinance lenders.
Microfinance Loans
Microfinance banks are a good option for people who may not qualify for traditional bank loans. These banks offer faster approvals but their interest rates are usually higher.
Dealership Financing
Some dealerships partner with financial institutions to provide in-house financing. This means that you can get a loan directly through the dealership instead of arranging one with your bank.
This car financing option maybe convenient but may come with higher interest rates or stricter repayment terms.
Co-operative Societies and Credit Unions
If you’re a member of a cooperative like Finsense, Total Coop, Pola Trust, and Synergy Cooperative, you can take advantage of low-interest car loans.
These are often more flexible and tailored to the members’ financial situations.
Fintech and Online Platforms
Digital platforms like Autochek and Cars45 have simplified car financing. They offer quick applications, faster approvals, and options for both new and used cars.
Types of Used Car Loan in Nigeria
If you're thinking about buying a used car in Nigeria, there are ways to do it without having to save up for years. Some banks offer car loans and offers flexibility for payment.
Here are some of the banks:
Stanbic IBTC
Stanbic IBTC allows you to buy a used car and pay back the loan over up to five years. You just need to put down 10% of the car’s value and have a salary account with them.
Stanbic IBTC offers competitive interest rates, and gives you monthly statements to track your payment.
However, the car you buy serves as collateral until the loan is cleared. Also, if it's a used car, it must be under 15 years old, so you can secure the loan properly.
First City Monument Bank
FCMB offers used car loans ranging from 500,000 naira to 30 million naira, which you can pay back within 12 to 60 months.
They charge about 33.5% interest per year and ask for a 20% down payment. One amazing benefit of getting a car loan from FCMB is that they include comprehensive insurance.
And if the car costs over 3 million naira, they add a tracker. This tracker helps to locate the car if it’s stolen and ensures the bank can monitor it until the loan is fully repaid.
FCMB also runs special promos with perks like fuel vouchers, free servicing, and extended warranties from partners like JAC.
United Bank of Africa
If you receive your salary through UBA, you can borrow up to 15 million naira to buy a used car and repay the loan over 48 months.
The interest rate for UBA is around 20–25% per year, and you’ll need to provide about 30% of the car’s value as an initial payment.
If your loan is approved, insurance is included, and a GPS tracker is added to the car to keep it secure while you’re repaying the loan.
Access Bank
Access Bank lets you borrow up to 70 million naira to buy a used car and pay back in monthly installments for a period of up to 48 months.
However, before you're granted the loan, you’ll need to pay about 10% of the car’s value upfront. Once approved, you get access to insurance, routine servicing, and car registration costs.
First Bank of Nigeria
First Bank’s auto loan helps you buy a new car. It allows you to borrow up to 15 to 20 million naira and pay back in monthly installments for a period of up to 48 months.
First Bank's interest is about 22% per year, and you’ll need 20 to 30% of the car’s value as an initial payment.
Aside from the money you're allowed to borrow, you get access to free servicing for a year, a fuel card, and registration help. You also get a warranty up to three years when buying through approved dealers.
Table Comparison of Banks Offering Car Loans
| Bank/Lender | Loan Amount | Down Payment | Interest Rate Per Year | Repayment Period |
|---|---|---|---|---|
| Stanbic IBTC | Based on your financial information I.e Your income, credit history, and existing debts. | 10% | Competitive | Up to 5 years |
| FCMB | 500,000 to 30 million naira | 20% | 33.5% | To 6 months |
| UBA | Up to 15 million | 30% | 25% | Up to 48 months |
| Access Bank | Up to 70 million | 10% | Competitive | Up to 48 months |
| First Bank of Nigeria | Up to 20 million | 20% to 30% | 22% | Up to 48 months |
Documents Needed for a Car Loan in Nigeria
Before any bank or financing company can approve your car loan, you’ll need to provide certain documents. These help the lender confirm your identity, check your ability to repay, and make the loan process smooth. Here’s a breakdown of what you’ll need:
Proof of Identity
The first thing you need is a valid means of identification. This could be your National ID card, Driver’s License, International Passport, or Voter’s Card.
These documents are needed by the lender to confirm you are who you say you are and to keep your records in their system.
Proof of Income
Before lenders approve your loan, they want to be sure you have a steady source of income to repay the loan.
If you’re employed, you’ll need to show your recent payslips or bank statements (usually for the last 3–6 months).
If you’re self-employed, documents like tax clearance, business account statements, or evidence of regular earnings will be required.
This step helps the bank or any other lender to determine how much you can comfortably borrow.
Proof of Age
Most banks in Nigeria only approve car loans for people within a certain age range, usually 21 to 60 years. To show you qualify, you may be asked for a document with your date of birth, such as your National ID, Driver’s License, or Passport.
Proof of Residence
Your current and permanent address will also be required. Lenders use this to verify your location and to contact you during the loan period if needed.
You'll need to go with documents like utility bills (electricity, water, or waste bills), tenancy agreements, or any official mail with your address will work too.
Credit History
Most financial institutions will check your credit report to see if you’ve taken loans before and whether you repaid them on time.
If you have a good credit history, it shows you’re reliable, but if you’ve defaulted in the past, your chances of approval may reduce.
Car Price Quotation
You’ll need to get a formal quotation from the car dealer or seller showing the price of the car you want to buy. This helps the bank calculate how much to lend you and the exact loan terms to use.
Passport Photographys
Lastly, you’ll need to provide a few recent passport-sized photographs. These are usually attached to your loan file for easy identification during the processing and approval stages.
Final Thoughts On Car Financing in Nigeria
Car financing in Nigeria has made it easier for many people to own reliable vehicles without the heavy burden of paying upfront.
Before choosing a financing option, it's important to alwaalys compare interest rates, repayment terms, and added benefits before making a decision.
To plan better and choose a car that fits your budget, visit Tokunbo.io to check real-time car prices. Knowing the market rates helps you set realistic expectations and pick a financing plan that works best for you.