Flat rate or reducing rate?
Most Gulf banks advertise car finance with a flat rate. The profit is worked out on the full amount for the whole term, even though you pay the loan down every month. That makes a flat rate look about half as expensive as it is. A 3% flat rate over five years costs about the same as a 5.6% reducing rate.
A reducing rate charges profit only on what you still owe. The APR (annual percentage rate) turns any offer into a reducing rate with fees included, so it is the fair way to compare banks. In Saudi Arabia lenders must show the APR in the contract.
Gulf rules for car finance
- UAE: banks may finance up to 80% of the car's price (at least 20% down), for up to 60 months. Total monthly debt payments may not exceed 50% of your salary. Early settlement costs at most 1% of what is left, up to AED 10,000.
- Saudi Arabia: consumer finance, including cars, may run up to 60 months. Payments taken from your salary may not exceed a third of it. Early settlement costs at most three months of future profit.
- Kuwait: monthly payments may not exceed 40% of net salary, over up to 5 years.
- Qatar, Oman and Bahrain: total monthly debts are generally capped at 50% of salary for expatriates.
The final (balloon) payment
Some leases in Saudi Arabia leave 20% to 50% of the price to the last month. The monthly payment falls, but the profit stays the same or rises, and at the end you must pay the balance, refinance it or hand the car back.
Frequently asked questions
How is the flat-rate monthly payment calculated?
Profit = amount financed × rate × years. Add it to the amount financed, take away any final payment, and divide by the number of months.
Why is the APR higher than the flat rate?
With a flat rate you pay profit on the full amount all the way through, though you owe less each month. The APR measures the cost on what you actually owe, so it is roughly 1.8 to 1.9 times the flat rate.
Is insurance included?
No. Comprehensive insurance is usually required and paid each year. Add it to your budget, and ask the bank whether it is built into the payment.
From the blog: Flat rate vs APR: how banks make loans look cheaper
Last reviewed: October 2026. This is an estimate, not an offer. Your bank's contract decides the final figures.
This page was translated from Arabic. If something is unclear or wrong, please tell us.