17 Jul 19

Car financing in expanding Ecuador market

Annual vehicle sales in Ecuador has more than doubled since the recession it faced in 2016 when only about 60,000 new passenger cars and light commercial vehicles (LCVs) were registered.

Approximately 100,000 new vehicles were sold in 2017, and some 137,000 in 2018, the latter representing a 228% jump from 2016. However, what are some of the ways to finance a car in Ecuador if you don’t have all the cash up front. According to Fleet LatAm’s own Wikifleet, among the options in the country are bank financing, dealership financing, and consortiums.

Financing Options

In terms of bank financing, the ideal condition for lenders in Ecuador calls for a 40% down payment, a loan period of 36 months, and an annual interest rate of 15%-16%, according to the country's automotive association (AEA).

Those who want to finance 100% of a vehicle will have to provide a guarantee with an asset or assets valued at 150% of the total amount of the debt. Approximately 70% of new cars are purchased with financing.

Pichincha and Austro banks account for just over half of the credit offered in the market, followed by Produbanco, Internacional, Amazonas, Guayaquil, Loja and other financial institutions. If you are a company seeking to acquire a large number of vehicles, negotiate appropriately as you are likely to get discounts and better terms.

Meanwhile, financing could also be obtained from dealerships and generally, terms include a 25% down payment and lending - through a third-party bank - with a period of 60 months. Interest ranges from 12%-16% and trading in a used car could be used as part of the payment.

For corporate clients, credit from dealers is given directly to their business clients. For example, a company may pay 60% of the value of the car and then settle the remaining 40% directly with the dealer in a years-time.

Finally, for private owner purchases, Ecuador has local car purchasing pools known as Consortiums. Programs usually call for a minimum of US$800 (local currency) and enrolling in the pool usually involves a group of 120 people, each paying a monthly fee and a lottery involving two cars awarded per month.

Once a car is acquired, there is no down payment, but the loan period is 72 months.

Chevrolet Sail, best-selling car in Ecuador in 2018 (source: Chevrolet)

With inflation, unemployment, and the benchmark interest rate hovering around 0.5%, 5.8%, and 8% respectively this year, a downturn in the market does not look likely soon. Ecuador has a population of approximately 16.6 million people, of which 2.33 million (one in every seven inhabitants) have a car.

For more information on the Ecuador fleet market such as taxation, safety, insurance, new mobility, and more, visit the country’s 12-chapter Wikifleet page here.

Authored by: Daniel Bland