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3. Engines Revving: A Cautious Rebound for Auto Loans in Lebanon

In Lebanon, the economic crisis has severely impacted all sectors, including the automotive market. For years, car loans were suspended, leaving many unable to buy vehicles. But now, a wave of change is sweeping in! With a slight economic recovery and new measures in place, Lebanese banks have started reintroducing auto loans, offering hope for those looking to upgrade or purchase a vehicle.

After years of economic hardship, Lebanese citizens are finally beginning to see the possibility of replacing their vehicle or purchasing one for the first time. Auto loans, previously halted due to the devaluation of the Lebanese pound, banking restrictions and the financial crisis, are now being offered again, though in a very limited capacity and with specific terms and conditions.

Lebanese banks have tailored their offerings to help revive the automotive market. These loans come with relatively attractive interest rates and terms that reflect the current economic climate. However, these loans are subject to strict evaluations of borrowers’ financial stability due to ongoing economic uncertainty. Additionally, the amounts granted are smaller than before to mitigate risks for banks. These loans are often capped and reserved for financially stable applicants.

A Cautious Yet Limited Resurgence

Chief Economist at Byblos Bank Nassib Ghobril clarifies that “the resumption of auto loans involves only a select number of banks, primarily targeting employees of companies with salaries domiciled in financial institutions.” He further clarifies that these loans are highly selective, based on salary levels. “This resurgence is cautious for two main reasons: first, banks are still facing liquidity shortages, and second, they have requested guarantees from both the government and Parliament, including a mechanism ensuring that fresh-dollar loans are repaid in the same currency. This precaution aims to avoid the mistakes made at the onset of the crisis,” says Ghobril.

Ghobril also highlights that auto loans remain limited because banks are testing the market and gauging Lebanese interest in such financing. He points out that the demand for auto loans has not been overwhelming, as the current conditions are not favorable for everyone, and many Lebanese cannot afford to pay part of the loan in cash, as required by the process.

He further emphasizes that the private sector loan portfolio has dropped by 84% since the crisis began.

Despite widespread rumors on social media and in the press about a mass return of bank loans, Ghobril argues that the banking sector is still far from reaching a level where it can sustainably finance the economy and private sector. Therefore, the return of loans remains limited and will largely depend on improvements in liquidity and financial guarantees.

A New Hope for Car Dealerships

For the automotive sector, even the modest return of auto loans offers a glimmer of hope. Dealerships are cautiously optimistic, seeing this move as a potential catalyst for attracting new buyers and boosting vehicle sales.

However, considerable challenges lie ahead. Banks must first restore liquidity and secure the necessary financial guarantees. In the meantime, Lebanese consumers face a complex situation, with the promise of economic recovery still far from being completely fulfilled.