Multiple used car dealerships in the UAE are starting to talk about delivery delays. Not just that, they are not seeing enough models coming through to sell. Image Credit: Ahmad Alotbi/Gulf News

Dubai: After a 6-month gap, prices of secondhand cars – particularly of the luxury models - in the UAE have again started to rise sharply, brought on by non-availability of enough vehicles to meet demand as well as delays in shipments.

Of course, the crisis over the Red Sea shipping lanes have made it more difficult to source used cars from Europe at ‘reasonable prices’, industry sources say. Container rates have by now risen by more than $1,000 on a TEU basis on shipments from any leading port in Europe to the UAE.

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But in general, availability of these vehicles have come down from other sourcing points as well, they add.

What it means for potential buyers is that they will end up paying 10-30 per cent higher on their model choice than if a similar deal had been made in October or November. Throw in the higher insurance rates they need to pay on their vehicles – many used car vehicles sellers are not offering free insurance perks – and the cost of ownership has jacked up quite a bit.

For UAE’s secondhand car dealerships, it all adds up to a most unfortunate set of circumstances. “It’s even tougher because we are still unsure when the shipments will come in,” said Hamid Shah, CEO of The4x$.com dealership network. “When we have that uncertainty on top of the struggle to source vehicles, it makes for a big impact on the used car trade.”

In each of the last two years, sales of pre-owned vehicles in the UAE was on a tear, with many industry sources saying they have not seen a similar demand rush ever. So much so, during the peak phase of 2021-22, prices of used cars that were 6 months to 1 year old were running ‘near neck-to-neck’ with their brand new options.

When we have that uncertainty on top of the struggle to source vehicles, it makes for a big impact on the used car trade.

- Hamid Shah of The4x$.com

All that used car dealerships had to ensure was having models to sell. If they had the stock, it was a given those would sell – pronto. Now, dealers have to compete for every available model that’s out there.

According to an industry source, “The situation is such for every used car model that’s available, there are 6-8 buyers lining up for it. That’s only because we don’t have enough inventory. When you have that situation, sticker prices of used cars can only rise, and that’s happening.”

Similar situation during Covid times

Much the same had happened during the peak Covid years, when supply disruptions played havoc with the global automotive industry. That fed into the used car supplies as well, which explains why prices had shot up in the UAE, Saudi Arabia and other Gulf markets from mid-2021 to mid-2023.

Shah says that the current situation ‘worse than that’, more so because no one in the industry had seen it coming.

Car buyers certainly didn’t, because through the last 6 months, used car prices had been dropping and they were reasonably assured of near-instant delivery once the deal was done.

New car prices

What could cause more problems for the used car market is if prices of new vehicles (except, say, those brought in from Europe) continue to remain stable. Auto industry sources say that until now, any uncertainty they face has had more to do with confirmed delivery times than on the ex-showroom prices.

That could still change if the Red Sea situation plays on. Coming weeks are going to see a slew of new model year launches, and so far manufacturers are reasoanbly confident of meeting shipment schedules, with 'one or two week delays at best'.

More to follow...