The used car market in the UAE is still slow because people are buying the cheaper new models instead. The prices of used cars have dropped by 10-15% in the last couple of weeks, and they will probably keep dropping, but the market still hasn’t picked back up very much.
One big thing that has contributed to this transition is extended warranties on new cars, many dealerships offer five years of bumper-to-bumper coverage. This trend has gained traction since the heavy rains in April, which caused widespread damage to vehicles.
“Many car owners realized the difference in service when repairing new cars at dealerships versus older, secondhand cars at independent garages,” said a secondhand car dealer. “I’m still holding stock purchased earlier in the year, even after reducing prices. Buyer mentality has shifted dramatically since the April floods.
However, new car dealerships find they can profit from extended warranties. Now, with that extended coverage, buyers have been persuaded that in the long run, it is a much better deal than buying a used car.
People are now buying new cars again because the prices are becoming more stable and there are many new models out,” says the President of one of the biggest dealerships in the UAE. “This wasn’t the case between 2021 and 2023.”
Rising Insurance Premiums
Another major factor influencing the shift towards new cars is the rising cost of insurance, particularly for used vehicles. Some new car purchases include an offer for one year’s free insurance, which has made it all the more difficult to resist the new models. The average insurance premium for newer cars has risen from AED 1,850 last year to AED 2,000 this year, partly due to the damages caused by the April rains.
“Even with the lower demand for secondhand cars, insurance premiums haven’t dropped,” said Avinash Babur, CEO of InsuranceMarket.ae. “In fact, we’ve seen a 10% increase in premiums between April and August. Many cars repaired after the floods are now back on the market, which raises concerns for buyers worried about potential hidden damage.”.
Discounts Not Enough to Boost Sales
Even with used car dealerships trying to market as hard as they can with “great deals” and “price cuts” and all the “Facebook promotions” of how they “check out the car” and how “transparent” they are, sales are still really slow. Who knows if the buying mood will be better in a few months.
On the other hand, new car sales in the UAE are prospering with a growth of about 20% year-on-year.
Imported vs. Locally Sourced Secondhand Cars
The UAE’s secondhand car market is seeing mixed trends. Hamid Shah, the CEO of 4×4 Motors says that used cars (khatmeh) made in iran are not selling as much because the iranians are afraid that the cars will be filled with water when it rains in april. But now people are more interested in “used” imports mostly from the us because those cars always come with carfax reports and stuff like that so people feel more secure in buying the car.
“While there’s a dip in demand for locally sourced secondhand cars, the market for imported cars from the U.S. is on the rise. These cars have a complete background report on them and it seems more people are attracted to that,” said Shah.
