Why now is the perfect time to buy a car in the UAE

Dealerships and private sellers are offering bargains in a competitive market driven by the effects of Covid-19

The 2020 Nissan Patrol is a popular choice for car buyers in the UAE. Victor Besa / The National

If you are planning on buying a car in the UAE, now could be a very cost-effective time to do so. Whether you are looking for a new or used car, industry experts say there is excess supply in the market and some great deals to be found.

While car dealers are sitting on large inventories and have come up with attractive offers for prospective buyers, private sellers who want to dispose of their vehicles fast are also willing to negotiate good deals, says Tarek Kabrit, chief executive of Seez, a mobile app that aggregates car listings from 28 UAE car websites.

“It is a very competitive market. A lot of people are leaving the country and want to sell their cars fast. You can negotiate good deals, particularly with private sellers," he says.

"Dealers are looking to dispose of old models as new models will begin to be launched. You can negotiate hard with them. We can expect some attractive offers from dealers for the upcoming Eid and towards the end of the year, particularly Christmas."

New and used car prices in the UAE have dropped by an average of 9 per cent since March, according to July data from Seez. While prices for premium brands have dropped 12 per cent over the same period, mainstream brands – which means any car under Dh180,000 – have experienced price drops of 6 per cent.

Prices for mainstream cars are the lowest they’ve been all year, says Mr Kabrit. For premium cars, prices are almost as low now as they were at their lowest point in April, he adds.

With some people’s spending power also taking a hit due to redundancy or salary cuts amid Covid-19, Imad Hammad, chief executive and co-founder of CarSwitch.com, an online marketplace for certified used cars in the UAE, says there has been a shift in preference to cheaper used cars.

“There is more value in used cars. New cars depreciate as soon as you drive them out of the lot. It is cheaper to buy a used car from a private seller but it involves a certain element of risk and hassle. That does not exist when you buy from a pre-certified dealer and you pay for that premium,” he says.

Typically, the cheapest second-hand cars can be bought from used car dealerships because they hold a larger inventory, Mr Hammad says.

"Private sellers tend to overvalue their car price, however, they are now dropping prices. If you buy from pre-owned, certified car dealers, they charge a premium because the car has been inspected," he adds.

When purchasing a car using a bank loan, buyers must pay 20 per cent of the car’s value as a down payment. As people’s purchasing power has reduced, more consumers are now considering car leasing as an alternative to the heavy upfront cost, says Mr Kabrit.

“Once you factor in insurance, loans, interest rates, warranties and service, leasing only turns out to be 5 per cent more expensive. But it is more flexible and gives you peace of mind. There has been a 50 per cent jump in leads in our Seez app towards leasing cars,” he says.

Although private car sellers typically overvalue their cars to secure a higher margin, buyers are now more savvy and educated about a vehicle’s fair value, says Mr Hammad.

As a result, some online car platforms report that listed prices are now very close to the actual sales price. Since last year, 80 per cent of transactions on CarSwitch.com occurred within Dh5,000 of the car’s advertised price. Around 20 per cent sold at more than a Dh5,000 discount.

“Forty per cent of cars were sold within Dh1,000 of the listed price. In another 40 per cent of transactions, the car was sold within Dh5,000 of the advertised price. Buyers don’t trouble themselves to see a car when it is advertised for a price that is well outside of what they agree is fair,” Mr Hammad adds.

Deciding whether to buy a new or second-hand model is a fairly straightforward process, says Mr Kabrit.

“The variables in a car purchase are the price, down payment, service package and warranty. If you can get a good deal on a model that you can afford from a dealer that comes with a discount and a service package, go for a new car. Otherwise, used cars are a safer bet,” he says. “Think before you opt for the higher version of any model. You won’t get a higher value for high-end trims when you try to sell the car.”

Distributors of leading car brands, both premium and mainstream, say they are preparing for a surge in customer enquiries during Dubai Summer Surprises and Eid Al Adha. After a sales standstill in April during the coronavirus-induced movement restrictions, dealers say they hope to lure customers back with offers that include free insurance, warranty and service packages.

Under Toyota's Al-Futtaim Auto Fest, for example, the distributor is offering to pay the 20 per cent down payment for models such as the Toyota Land Cruiser, Fortuner, FJ Cruiser, Supra, Corolla, Camry and Rav4. The deal also comes with a job loss insurance policy, which covers the buyer for six instalments or up to Dh20,000 in the event of a job loss.

“Demand is picking up from Q2 going to Q3. We have offered a lot more flexibility to our retail customers on how they pay for their vehicle. By and large, most customers were financing their vehicles through banks. From last year, we are offering more flexible solutions like leasing as well as low monthly payment financing options,” says Saud Abbasi, managing director of Al-Futtaim Toyota.

The Toyota dealership has accelerated its leasing business on various models this year for customers who don’t want to lock themselves into a four-to five-year bank loan. “On leasing, you can get away with a lower down payment. Leasing covers your service, maintenance, offers you a replacement vehicle in case your vehicle goes for servicing, and covers insurance and registration,” Mr Abbasi says.

Al-Futtaim Toyota says it is tight on inventory and “fairly comfortable with our stocks right now”. The company launched two models in the second quarter, the Toyota C-HR and Toyota Highlander, both hybrid-electric vehicle SUVs. The distributor also says that large SUVs like the Land Cruiser fared well during the crisis.

Abu Dhabi Motors, the official importer for BMW Group vehicles in Abu Dhabi and Al Ain, meanwhile, says it is eager to regain lost ground. It is currently running a 'valued service' campaign, which offers customers a 50 per cent discount on parts and a 15 per cent discount on labour services.

It is also offering a selection of financing deals across its 2019 and 2020 models.

“Recent trends indicate that sales will pick up in the second half of the year. Our research demonstrates that due to concern of infection, many residents are hesitant to take public transport and surround themselves with large crowds. Therefore, there is an emphasis on car ownership, as many consumers want to own a car to safely maintain cleanliness in the spaces they occupy,” says Syed Faiz Karim, national sales operation manager at Abu Dhabi Motors.

Although leasing is a key part of the distributor’s sales strategy, with some BMW models available from Dh2,799 per month “traditional car ownership considerably outpaces leasing across our dealerships in Abu Dhabi and Al Ain”, adds Mr Karim.

Al Majid Motors, distributor of Kia vehicles in the UAE, is currently offering promotions under a new campaign where some models come with one year's free insurance, a free service package, one year's roadside assistance and a manufacturer warranty of five years or 150,000 kilometres. These offers are valid on the Sportage, Pegas, Optima, Cadenza, Cerato, Picanto, Soul and Sorrento. The dealer also dropped prices on Kia models by 4 per cent in June.

“We have some volumes of 2020 models which need to be cleared before we order 2021 models. All promotions are mainly on 2020 model cars, so this is the best time to buy them,” says Amei Ramesh, general manager, Al Majid Motors.

He adds that customers can also trade in their old car of any brand and buy a new Kia.

Audi Middle East is also running promotions across its dealerships. Audi Abu Dhabi offers customers up to 20 per cent deposit contribution, 0 per cent finance for up to five years or added value items such as unlimited mileage warranty for five years and more.

Audi Al Nabooda dealership in Dubai is offering 0 per cent interest on financing for up to five years, a five-year service package or 105,000km (whichever comes first), a five-year maintenance package or 105,000km (whichever comes first), a five-year warranty with unlimited mileage, five-year roadside assistance and free registration and insurance for the first year.

Buyers can also purchase second-hand Audis through the company's approved programme and Al Nabooda Automobiles’ rental department offers various 2020 models on a one-year lease with a 30,000km allowance per year.

“Our research revealed that almost 50 per cent of consumers are considering buying cars online now. Currently, we have e-commerce sites available in Abu Dhabi and Dubai for new cars only but these will be extended to include pre-owned cars, parts and accessories in the future,” says Carsten Bender, managing director of Audi Middle East.