AZE.US
Low down payments can make expensive vehicles appear affordable, but commissions, insurance and higher monthly installments may significantly increase the final cost.
Expensive vehicles are increasingly being offered in Azerbaijan through leasing or installment plans requiring only a small initial payment.
While such offers may appear attractive, buyers could ultimately pay far more than the vehicle’s cash price, economist Khalid Kerimli warned.
Kerimli told Demokrat.az that consumers should first calculate the total amount they will pay over the entire leasing or installment period.
“The main issue is determining how much more the buyer will pay compared with the cash price,” he said.
For example, if a vehicle costs 10,000 manats when purchased outright but the total installment payments reach 15,000 manats, the additional 5,000 manats represents the buyer’s extra financial burden.
Kerimli said some contracts may include commissions, monthly service charges and other fees that effectively increase the cost of financing.
Buyers should therefore compare the vehicle’s cash price with the full amount payable under the contract rather than focusing only on the advertised interest rate or initial payment.
Mandatory Insurance Adds to the Cost
Comprehensive vehicle insurance, known as KASKO, should also be calculated separately.
KASKO is usually mandatory when a car is purchased through credit or leasing because the vehicle remains collateral for the financial institution.
Kerimli stressed that insurance raises the total cost of the transaction but should not be confused with interest. It is a separate insurance product.
Low Down Payment Means Higher Monthly Costs
The economist also advised buyers to determine whether monthly payments are compatible with their income and household budget.
Consumers should consider whether they can meet the obligation without cutting essential daily expenses or placing excessive pressure on their families’ finances.
“The smaller the initial payment, the higher the monthly installments will be,” Kerimli said.
A low down payment may also lead to a higher interest rate because the financial institution assumes greater risk.
Before signing a leasing or installment agreement, buyers should carefully review all contract terms and calculate the full cost, including interest, commissions, insurance and recurring service fees.