UAE car buyers shift to new vehicles as 3-5 year warranty, free 1-year insurance score
Car buyers still reluctant to opt for preowned vehicles after April rains, insurance hikes
Dubai: Sales of secondhand cars in the UAE are yet to pick up to sizeable levels as buyers look to budget-friendly options available in new car models. This is despite the 10-15 per cent drop in prices of secondhand cars through recent weeks, and of which there could be more cuts.
Plus, more than ever before, more dealers offering extended after-sales warranties of 5 years (even more) is shifting buyers’ attention to new model purchases. This is becoming increasingly evident since the April rains and the water logging that brought about damages to vehicles caught up in it.
“Many car owners found a world of difference between having their new/slightly cars repaired at the dealers, and secondhand vehicles taken to independent garages,” said a dealer in preowned vehicles. “I am stiff left with stocks bought in March and April, even though we have dropped prices across the board. There’s been a mindset change since April and we got caught in it.”
New car dealers find they are belatedly getting the gains from their 3-5 year warranty coverage, with today’s buyers convinced that this would serve them better in the longer run rather than opt for a used car.
“The preference is shifting back towards new car purchases as consumers take advantage of the stabilized pricing and supply of new models,” said the CEO of a leading dealership in the UAE. “This was not the case in 2021 to 2023.”
Insurance premiums bite
Apart from the extended after sales coverage, the other factor behind the shifting preferences in the new car vs. second car debate is the availability of free one-year insurance on brand new vehicle deals.
The spike in insurance has been really hurting car owners in the UAE, with the average premium on renewal for a relatively newer vehicle is at Dh2,000 against Dh1,850 a year earlier. The April rains certainly have left their mark on motor premiums.
“On insurance premiums, the average rates have not decreased despite the potential dip in demand for secondhand cars,” said Avinash Babur, CEO of InsuranceMarket.ae. We've observed an average increase of approximately 10 per cent in premiums between April and August.
“Many customers who had their vehicles repaired after the floods are now looking to sell them, leading to a market flooded with cars that may have sustained flood damage or undergone significant repairs. This has understandably raised concerns among potential buyers, who may prefer purchasing new vehicles or opting for cars from authorized dealers to ensure they aren’t stuck with a car that might have hidden issues.”
Heavy on discounts
On social media channels, secondhand car sellers have stepped up their sales promotions, emphasizing that the vehicles are put through rigorous quality checks and promising transparent pricing. Yet, summer sales have been slow and it’s still early days on whether the sentiments would change for the rest of the year.
As for new car sales in the UAE, it’s a fairly smooth ride, with year-on-year growth at around 20 per cent.
Imported or locally sourced?
Hamid Shah is the CEO of 4x4 Motors. He makes a point that the UAE secondhand car market is seeing two trends in play.
“One, you do have the lower demand for secondhand cars that are sourced locally,” said Shah. “Because these are ongoing buyer concerns as to how these vehicles may have fared during the rains.
“At the same time, demand for imported secondhand vehicles from the US has seen a rise after the summer slowdown. These vehicles come with a complete history of what they been through, and all the details are immediately available for the new buyer. In fact, this category of imported secondhand cars is where you are seeing more new entrants launch businesses.”