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Automobile Sales & Finance

Finance For Sales people

Course Content
Stocks in Hands
Direct Import of Auto (exchange rates etc)
advantages/limitations
Local LC and its impact on Stock cost

Invoices to Customers

Effects of Rebate/ Refund on Invoicing


VAT, WHT, Income Tax application in Auto business

Bank Finance for Customers

Type of facilities for Vehicle & Asset Finance;


Document Requirements;
Approval Stages/ requirements
Disbursements/Charges
Interest rates (fixed/floating)

Stock Ageing and Exchange Rate effect on it

ocks : Direct Import of Auto


Afri Ventures Charges Interest on USD paid to
Foton from KNL Auto till it pays back the money

Afri Ventures
Dubai gives
Order to Foton
and makes the
payments

Foton
Manufactures
Vehicles and
ships them to
KNL Nigeria
and receives
money from
Afri Ventures

KNL Nigeria
sells and pays
back to Afri
Ventures Dubai

KNL Auto sells the vehicle in Naira


and pays back to Afri Venture in USD

ect Import of Auto (exchange rates etc)


Advantages

Disadvantages

Low interest rate on financing


compared to Nigeria Banks
financing

Exposed to Exchange rate


variations

When Exchange rate is stable,


we offer lower prices than
competition taking financing

When Exchange rate


depreciates, then you get less
USD for the same naira and
cannot send the full money
back and end up making loss.

Local LC
Advantages

Disadvantages

Costing is fixed over a period of


time

High interest rate

Safe in high exchange rate


variation banking system

We cannot carry stocks for long


with local borrowings

nvoices to Customers
Effects of Rebate / Refund : Increase in VAT & Income
Tax liability.
VAT, WHT, Income Tax application in Auto business
VAT : a tax on the amount by which the value of an
article has been increased at each stage of its
production or distribution.

nvoices to Customers
WHT : A withholding tax, also called a retention tax,
is a government requirement for the payer of an item
of income to withhold or deduct tax from the
payment, and pay that tax to the government.

ank Finance Local Borrowings

Document requirements
Application Letter
Duly completed application form
Duly completed loan agreement form
Proforma invoice from Kewalram Nigeria Limited
6 months statement of account
Utility Bill i.e. PHCN, NITEL OR Water Rate bill
Means of identification i.e. Drivers license/ International Passport/ National ID
Card
1 Passport photograph
Letter of Undertaking to notify bank in the event of change of address, employer
or relocation abroad

ank Finance Local Borrowings


Letter of authority to the Bank to insure vehicle comprehensively at own
cost through FBN Insurance Brokers
Opening of Current Account (for non First bank customers)
Letter of undertaking to domicile business proceeds into First Bank Account
no. (for private individuals or companies)
Certificate of incorporation and Article & memorandum of Association
(copies)
Board Resolution to borrow
Cash Flow
Company / Directors profile and business experience
Additional Income/ Businesses

nk Finance Overseas Borrowings


Lower interest rates (less than 10%)
Repayment in USD or Euro or agreed foreign currency
Loan terms from 3 5 years
Payment guarantee by a local bank in most cases
Fixed monthly USD payments to the overseas financer
Good option
when Exchange rate is stable,
your repayment cost is fixed in Naira as your earning/profit is also fixed in
Naira

Very bad option

when Exchange rate is volatile, you will do business in Naira at fixed profit
which may wipe out when repayment is done if exchange rate is falling
as you will spend more Naira for the same USD monthly payment

ock Ageing & Its impact on Price


Direct Import Case
If exchange rate is stable
Low interest cost, you can carry stock for a longer
period
If exchange rate is falling
Immediately sell the stock as you will get less USD
for same Naira unless price is increased

Local Borrowings

High interest rate will limit the stock holding period


Limit on investment in stocks due to limitation on
working capital

ally, we should rotate stocks twice in one year.


nce stock holding should not be more than 180