Car Financing in KSA Explained: Loan Types, Rates & Easiest Ways to Get Approval

Saudi Arabia: Financing is the most common path to car ownership in Saudi Arabia. Most buyers, local or expatriates, choose to finance their car purchase, as getting a loan is much easier than before. After the house, a car is the most expensive possession for families or individuals, with a giant outlay of cash. Therefore, instead of paying the full price upfront, car buyers spread payment over a suitable duration, anywhere from 1 to 5 years. Interestingly, these monthly payments are either through bank loans, lease-to-own plans, or dealer are affordable and are often Shariah-compliant structures, thus avoiding traditional interest.

Car financing has emerged as a big segment for finance companies that engage in intensive competition to attract buyers.  In 2025, banks, finance companies, and dealerships are jostling for business, pushing rates much lower, which directly benefits the end customers. Anyone looking for a car loan is spoiled for choice, along with several perks, such as zero down payment, balloon payments, and bundled insurance, all of which make it really easy to match a plan to any budget. 

What has further bolstered car financing are the quick digital applications, salary-based approvals, and online calculators that show estimated monthly payments. Getting approved has become faster, more transparent, and far less intimidating than before.

Types of Loans 

Auto Leasing (Ijarah)

This is the first and most established method available in the Kingdom of Saudi Arabia. In this case, banks or finance companies buy the car and lease it to you, and you don’t purchase it. Just pay the monthly rental payments, and ownership transfer at the end of the lease period. Interestingly, the car gets registered in your name from day one, but the bank technically owns it until the completion of the lease tenure. 

Importantly, leasing is Shariah-compliant and generally comes with far lower monthly payments designed for most car buyers. Banks like Al Rajhi Bank, Riyadh Bank, and Saudi National Bank have highly competitive programs with rates ranging from 3.5% to 5% annually.

Murabaha Financing

Another way to ease your one-time payment outlay, Murabaha financing is another way of buying your car. In this case, the bank purchases the car at market price and then sells the same to you at a fixed price, which you then repay through a markup paid in installments. To protect you from escalating prices, the profit margin is fixed upfront with no fluctuations, and so you end up paying exactly what you will pay. Keep in mind that Murabaha often costs slightly more than leasing but offers complete certainty and transparency.

Traditional Installment Financing

You can also choose the traditional ways to finance your car. Some banks offer conventional loans that calculate interest on the outstanding balance. You have the option to pay down the principal, and interest charges decrease. This is not a bad option, as the reducing balance method can save money, but it is less common due to the preference for Islamic finance products.

Current Interest Rates

Loan Type	Interest Rate Range	Example Bank Rate	Factors Affecting Rate
New Car Financing	3% to 5% annually	Al Rajhi Bank: starting 3.5% with salary transfer; ~4.6% without	Salary level, employment sector, down payment, loan tenure, SIMAH credit score
Used Car Financing	4% to 6% annually	Not specifically listed	Same as new car financing

Flat Rate vs Reducing Balance

Interest Calculation Method	Description	Cost of a SAR 100,000 loan for 5 years	Recommendation
Flat Rate	Interest on full original amount throughout the term	SAR 20,000 total profit	Ask if used, prefer reducing balance if available
Reducing Balance	Interest only on the outstanding loan amount	SAR 10,500 total profit	Always insist on this method

Eligibility: What Banks Look For 

This is an interesting aspect of your car financing journey. To avail a loan, there are certain criteria that all these companies look for. The primary objective is to make sure of the creditworthiness, and if you have everything in order, the entire process will be just a cakewalk. 

Age and Salary

As per law, the minimum age is typically 21 years, and the maximum age at loan maturity is usually 60 for the private sector and 65 for government workers. Most banks require a SAR 5,000 to SAR 8,000 monthly minimum income, and for expatriates, it goes up to SAR 8,000 or more.

Employment History

You need at least 3 to 6 months at your current employer; in some cases, this may go up to 2 years for expats. A frequent job change reflects poorly and may hurt approval chances.

Debt Service Ratio

As a rule of thumb, your total monthly debt payments, including the new car loan, should not exceed 33% to 40% of your salary (sometimes 50% for high earners). This determines your maximum loan amount.

SIMAH Credit Score

This is one solid tool, where SIMAH maintains credit records for everyone in Saudi Arabia. And these numbers are extremely helpful in determining your chance of getting a loan as well as the best deal. Let's just say there are certain brackets of scores ranging from 300 to 850. Above 700 is acceptable, above 750 is excellent, and below 600 makes approval difficult. It is better to first verify your score before applying using the MOLIM app (SAR 17 for a score verification, and SAR 29 for a full report). If your score is low, you need to improve it for 6–12 months before applying.

What Documents Needed

For Saudi nationals

• A National ID
• Salary certificate (within the last 3 months)
• Bank statements (last 3-6 months)
• Valid driving license
• Car quotation from the dealer

For expatriates, add

• Valid Iqama
• Employment contract
• Letter from employer confirming employment duration

Best Ways To Deal with Approval 

Improve Your SIMAH Score First

Before applying, check your score, and if it is below 650, you must work around that first. This involves paying all your bills on time for at least six months, getting out of debt, and avoiding any new credit applications or credit card applications. Each application creates an inquiry into the system, which is not only accessible to banks but also drops your score.

Increase Your Down Payment

While the standard down payment requirement is 10% to 20%, if you can go beyond that to, say, 30% or 40%, then your application gets better treatment. The lender treats the higher down payment as a sign of superior financial strength that potentially reduces the bank's risk. Additionally, a higher down payment reduces your monthly installments and the total interest paid.

Choose the Right Loan Tenure

The tenure of your loan is one critical factor, and so generally longer terms mean lower monthly payments but higher total cost. A 7-year loan costs around 42% more in total interest than a 4-year loan. Think of it; it is quite a lot of money. It is advisable to follow the 20/4/10 guideline: 20% down payment, maximum 4-year term, and a monthly payment under 10% of gross income.

Transfer Your Salary

This is one good step, where you transfer your salary to the bank, thus improving approval and the chance of securing a better deal on rates. Al Rajhi offers rates 1–1.5% lower with a salary transfer. Transfer your salary first, wait 2-3 months, then apply.

Apply During Promotional Periods

Another trick that could potentially save you money is also getting a good deal, as banks run special offers during Ramadan, Eid, National Day, and year-end. Toyota, Lexus, and Hyundai dealers frequently offer 0% financing deals where manufacturers subsidize the bank's profit.

Compare Multiple Banks

It is better to apply to 3-5 banks simultaneously after you compare rates, total cost, fees, and flexibility. Use comparison platforms like Yallacompare or Arib to submit applications to multiple lenders without multiple credit inquiries.

Banks charge different fees:

• Administrative fees of about 1% of the loan amount or SAR 5,000.
• Early settlement penalties are usually 3 months' profit.
• Insurance requirements with mandatory comprehensive coverage 

Dealer Financing vs Bank Direct

Always compare both of them to explore what works best for you. 

Always compare both of them to explore what works best for you. 

Dealer financing is quite convenient with one-stop shopping. Dealers sometimes offer incentives, but this may not always be the case for the best rates because of their commissions.

Direct Bank Application: Get pre-approval before shopping, putting you in a stronger negotiating position as a cash buyer. Often secures better rates but requires more paperwork.

Foreign National Special Considerations

Car financing for foreign nationals is different from local financing in Saudi Arabia for obvious reasons. If you’re not a resident, then you need a minimum of 2 years of residency and an Iqama with at least 1 year of validity remaining at loan maturity. Minimum salary requirements run higher, upward of SAR 8,000. Your profession also matters and plays a role. For example, engineers, doctors, and managers get easier approval than retail workers.

Red Flags 

• Never fall prey to an extended loan term just to afford the payment.
• You mustn’t avail a loan if the monthly payment is more than  10% of your income.
• Always learn about early settlement penalties before signing.
• Never choose balloon payments unless you have a clear plan.

Application Timeline 

• Day 1-2: Apply, SIMAH check
• Day 3-5: Bank’s process with the application review.
• Day 5-7: Preliminary approval with terms
• Day 7-10: Complete car purchase, provide quotation
• Day 10-14: Bank processes final paperwork and insurance
• Day 14: Take delivery

Fast-track approvals through dealer partnerships can be completed in 3-5 days with strong credentials.

Conclusion

Overall, availing a loan to buy a car is the most obvious choice for most buyers in Saudi Arabia. And the entire process of getting one is rather straightforward and transparent. As long as you have all the paperwork and fulfill the criteria with proper preparation and comparison shopping, you can secure financing that fits your budget without overpaying.

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