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New bank ruling on car financing revs up rental business in UAE

Huge demand on a monthly basis from expatriates and visitors

Gulf News

Abu Dhabi: Car rental agencies are experiencing strong sales as a result of new rules that end 100 per cent bank financing for new vehicles.

The Central Bank's ruling — which requires buyers to pay 20 per cent of the price of the car up front — has persuaded many drivers that long-term rental is an easier and a more affordable option.

"We see a trend of customers choosing small- to mid-size cars during these economically challenging times," said Rahul Singh, general manager of Thrifty Rent a Car.

"There is a huge demand on a monthly basis from expatriates and those who stay for a longer period in the country."

But Singh added that increased demand has fuelled competition, with a number of operators now active in the UAE market.

"There is a rise in the amount of car rental businesses and, therefore, an increasingly competitive market with value-conscious consumers," Singh said.

Thaer Dalilah, an Arab expatriate in the UAE, said that he hires a car as he cannot afford to buy a new one after the government's 20 per cent deposit rules.

"My salary is Dh5,000 and I have to drive to my work in Musaffah and get back to Abu Dhabi. It will be very expensive to me to go by taxi from home to work six days a week. I pay Dh850 per month and I can ask for the option of owning a car after one year," added Dalilah.

Opportunities abound

But Nigel Johnson, managing director of Hertz, told Gulf News that it was difficult to say whether the growth can be attributed to the UAE government regulations.

"I would not go as far as to suggest that there is a boom in car rental business in the UAE. However, car rental companies see some strong growth on year-on-year volumes of reservations" he said.

"It is difficult to know the impact of the recent rule changes to vehicle financing, However, I suspect that some customers have sought to rent ahead of buying at this time.

"We have started to see an economic recovery from the impact of the financial crisis which in turn has seen the corporate sector starting to re-invest in the opportunities that exist here," he added.

It is not just residents that are opting to rent vehicles rather than use their own, Thrifty's Singh said. He pointed out that GCC tourists — who often have their cars shipped to the UAE for their holidays — are now opting to rent.

This is especially the case, Singh said, in the summer, when taxis can be more scarce in Dubai and Abu Dhabi.

Ahmad Mutawa, a Kuwaiti tourist who is currently visiting the UAE, backed up this view.

"It is cheaper for me [to rent] and much more suitable and comfortable for my family since we are seven people. No taxi will accommodate us and it is hard to move around the country without a car," he said.

As a result, Singh said, growth is likely to increase after a brief Ramadan slump.

"We expect that car rentals will rise until the end of April 2012; during Ramadan, there will be a decline, and after Ramadan, car rental movement will revive," he said.