New UAE residents drive car leasing and subscriptions as cost of purchase dominates

Dubai: Guess who’s driving the UAE’s car rental and subscription boom lately? More and more new residents of the country, at least for the first few months, prefer to rent/subscribe their wheels rather than buy.

In addition, a growing number of companies are offering rental car perks and other benefits in packages that are designed to offset the inflationary costs that individuals take home. “For a certain type of employer, supplying a car is now a criterion for their appointments to mid- to senior-level positions,” said the head of a recruiting firm. (In addition, employer contributions to cost-of-living allowances and rent have increased in more work contracts.)

Either way, the profile of those renting cars through digital portals or brick-and-mortar rental companies is changing. Nicholas Watson, CEO and co-founder of on-demand rental platform Udrive, can attest to this.

“The largest increase in usage has been in larger vehicles, such as SUVs and family vehicles, primarily driven by more newcomers,” Watson said. “While we serve the largest residential user base, we are also seeing There is an increasing demand from business tourists and ‘temporary’, people coming here for a longer stay.

“Our average occupancy is 85% residents and 15% tourists. We see that trending to 80:20. As we continue to add vehicles, we expect to see more non-residents over the rest of the year Availability of vehicles.”

Time is on the pulse of new car dealerships for brand new expats in this country. Buying a car is — if they have the budget — one of the first things these newcomers do when they get their driver’s license. no longer.

“The buyer landscape is changing and we are seeing more and more people who just want to lease a car or become a monthly subscriber (with the option to switch cars),” said the CEO of a leading dealership in Dubai. “It’s not just among young people – even among older cohorts, the willingness to buy new products is lower.

“Today, no dealership can do without a strong used car business or a leasing or subscription service.”

Currently, new car sales in the UAE are taking care of themselves. Year-over-year growth was pegged at 10% or more, but more dealers said growth was unlikely to hit the 20% or higher range, which was seen earlier in the past decade.

“Owning a car is more than buying a car — there’s insurance, parking fuel, maintenance, damage and depreciation, all of which need to be factored in,” Watson said. “There’s really no point in owning a car unless you’re driving more than 1.5-2 hours a day.

“It basically becomes a discussion of disposable income. Hardly anyone buys DVDs and Microsoft Office CDs anymore — they’re all on-demand and subscription-driven, driven by technological innovation.”

But car rental rates have also been rising. Carriers cited rising car prices since late 2020 as the main reason. Businesses have to pass the cost on to consumers, which is what has happened.

“The average price of an economy car has increased from Dh38,000 to Dh48,000 in the past 12 months,” Watson said. “Because leasing is such a big cost driver, it affects the rental price per minute or per day.”

Soham Shah, chief executive of Selfdrive.ae, has a different view on rental tariffs. He said the spike in leasing rates occurred mostly during and after the expo. Also, a global shortage of chips has hit automakers on the production side.

“This created extreme vehicle shortages and, as a result, the overall vehicle cost peaked,” Shah said. “However, this has been corrected since Q1-23.”

“Given the rising interest rates, there is less demand for cars in the market. This will eventually lead to more availability of the rental fleet.” As the market adjusts, customers can expect to see a reduction in rental and subscription costs. “

Selfdrive.ae works directly with manufacturers, dealers and rental companies in the GCC. As such, its app offers users a range of vehicle and rental options. “Our platform sees a new need for flexible and affordable mobility,” Shah said. “By offering a range of subscription and leasing options, we are able to offer users a more cost-effective alternative to traditional vehicle ownership.”