I have been in Dubai for six months, earning around Dh17,000 a month. I am planning to get a car but want to know what the best option is in terms of renting, or buying a second-hand or new car?
Cars are a popular method of transport in the UAE, largely because of their relatively low prices, as compared to other countries. This is a result of there being no tax levied on the purchase and sale of vehicles.
As a result, a brand new compact to mid-size automatic car will only set you back by between Dh40,000 and Dh55,000.
However, you should remember that it is often said that the moment a car leaves the showroom, it immediately loses its value.
So, you can buy a good car for even less if you opt for a second-hand one. In general, a car's value depreciates depending on factors such as the age of the vehicle, its mileage and its general condition. A car's value also falls when newer models are launched.
However, when buying a second-hand car you must realise that the maintenance costs can be high — if it is over 12 months old, for example, then the original warranty may have lapsed and you will have to cover the cost of all repairs and maintenance work.
Securing a car loan to make the purchase is normally a simple procedure, with most banks and financial institutions requiring a salary certificate from your employer, a copy of your passport with a valid residence visa, and a six-month bank statement to approve the application.
Lenders normally ask for 10 per cent of the purchase value as a deposit and loans are usually paid back over five years. The annual interest on such loans is between four and six per cent.
When buying a car, it's not just the actual cost of the vehicle you have to take into consideration.
Once you own a car outright you are solely responsible for registering it with the Roads and Transport Authority (RTA). This costs about Dh400 per year.
You will also need to get motor insurance. Third party insurance is mandatory across the UAE. Speaking to an independent financial adviser about this is one of the key steps to getting your own vehicle safely and legally on the road.
Insurance premiums
Car insurance premiums are calculated according to the year, make and model of the car, age of the driver, claims and driving, cubic capacity of the engine, and value of the motor vehicle. So the older the car, the higher the premium. This adds to the cost of buying a second-hand car.
A rate of between 3.5 per cent and 4.5 per cent a year is considered to be a competitive price for a comprehensive policy, which normally includes round-the-clock accident and recovery services, cover for third parties — including family members — with the driver receiving personal injury cover, guaranteed repairs, off-road cover, and medical expenses in an emergency situation.
Third-party-only cover is cheaper, but will just insure you against injury or death of third parties and damage to their vehicle or property. If you have taken a loan to buy your motor vehicle, then most financiers will insist that you have comprehensive insurance.
By renting a car, all these extras are taken care of for you. Most rental companies include insurance as part of their monthly deal, which for a small family car will set you back by around Dh1,600 per month.
Leasing for long periods can feel like throwing money away, but leasing can provide peace of mind and you don't have to think of borrowing more money to get your next car.
The writer is the director of general insurance at Nexus Insurance Brokers LLC. The views expressed here are the writer's and not necessarily those of Gulf News. If you have any questions please email to advice@gulfnews.com
