Buying a car, either new or used, is a major investment for most consumers and it needs thorough planning to avoid losing money.
Buyers must consider many factors before picking the right car so they do not end up with a wrong purchase.
The glib marketing campaigns and “now or never” deals promoted by salespeople in car showrooms can make the process even more challenging.
Things to know
If you are buying a pre-owned car, do your due diligence before going ahead with the sale.
Kiran Viswam, a senior analyst in Dubai, recalls having a bad experience trying to purchase a used car in 2021.
He saw a listing on a classifieds platform for an Infiniti Q30 below the market price. The listing said it was a year old with a GCC warranty and full service history.
It was listed for Dh65,000 ($17,699), while the market rate was about Dh75,000. It seemed like a good deal, he says.
However, after Mr Viswam, an Indian, did a test drive and paid Dh5,000 as a deposit, the seller refused to take the car for a comprehensive inspection.
On checking the chassis number, Mr Viswam found that it was a salvaged car imported from the US. It also had an accident history. However, the seller refused to return the Dh5,000 deposit.
“Always try checking the car’s chassis number on Google. You could find out its accident history,” he says.
The UAE used car market is expected to grow at a compound annual rate of 8.3 per cent from 2021 to 2025, according to a report by data platform Research and Markets.
More than a million used cars are expected to be sold in the country by 2025, according to the report.
About 56 per cent of respondents to Statista’s Global Consumer survey last year said fuel efficiency was a top priority when shopping around for cars. This was followed by 55 per cent who chose safety and 46 per cent went for a low price.
Only 32 per cent seem to be primarily concerned with the appearance of their new car, while 43 per cent of respondents said they prioritise high quality, the survey found.
We asked car industry experts to list the most common financial mistakes people commit when buying a car in the UAE.
1. Not considering overall cost of ownership
One of the biggest mistakes is not considering the overall cost of ownership, experts say. Besides the upfront payment, customers should also take into account costs associated with fuel consumption, insurance, parking and maintenance costs.
After you buy a car, the next financial concern is maintenance over its life, according to Marwan Chaar, co-chief executive of used-car retailer Kavak GCC.
A customer should always look for a long-term warranty to minimise the financial risk they are exposed to, he says.
Purchasing a service contract upfront will likely have a cost saving, so consider picking one up, says Imad Hammad, founder of car classifieds platform CarSwitch.com.
“These contracts don’t have to be from the official agencies; reputable garages will likely be more cost competitive,” he says.
Beyond regular service, don’t forget ongoing maintenance costs. Parts, service and overall maintenance of Chinese, Korean and Japanese makes are generally cheaper than European makes, he says.
2. Using a car loan to pay for deposit
Banks in the UAE ask for a 20 per cent deposit from people looking for finance to buy a car.
People make the mistake of using bank finance to pay for the down payment, says Paul Willetts, an automotive consultant and founder of Gemini Automotive Solutions, which helps buyers and sellers to navigate the used vehicle market.
“That puts the customer in a difficult situation, especially when they need to leave the country quickly. They end up owing the bank a lot more than the value of the car,” Mr Willetts says.
“If you can afford to pay for the deposit yourself, do it.”
3. No proper research
A tonne of information is available online, so be sure to compare all the options you are considering, keeping in mind the total cost of ownership, says Mr Hammad.
That includes service, maintenance, fuel consumption (hybrid/electric a big advantage here) and, of course, the resale value, he says.
“Ultimately, the largest expense of owning a car is how much it will depreciate [how much money you will have lost] when you come to sell it,” Mr Hammad says.
“A new car will lose 20 per cent to 30 per cent of its value in the very first year, and 15 per cent to 20 per cent each year thereafter.
“Some makes do a much better job at retaining value than others, for example Toyota Land Cruisers and Nissan Patrols generally do a great job retaining value in the UAE. American makes generally, for example Lincoln, are not as great.”
A new car typically depreciates about 15 per cent to 20 per cent on the day it is driven off the showroom floor, Mr Chaar says.
“For anyone looking to save money, the best approach is to buy a high-quality used car,” he says.
Compare the car with whatever else is advertised on the market to make sure your money is going the furthest it can, Mr Willetts says.
It is OK to be offered freebies and value-added services but if you are overpaying for the product in the first place, then it is not really free, he warns.
“For example, some dealerships have adjusted their prices 10 per cent higher than others, but offer a warranty, free tinting, etc. It looks good to the customer to get all these things for free, but they are overpaying for the car in the first place,” he says.
4. No pre-purchase inspections
Pre-purchase vehicle inspections have become very popular in the past three years among people buying used cars, says Mr Willetts from Gemini Automotive Solutions.
Customers can do comprehensive checks on pre-owned cars at Tasjeel centres across the UAE.
They can check the car’s accident history, mileage history, service history and the general condition to make sure that the buyer’s money is going as far as possible, he says.
Mladen Zivanovic, 27, a Serbian volleyball coach in Dubai, thought he had secured a good deal for a Nissan Versa that was listed for Dh17,000 on an online platform.
Mr Zivanovic had recently moved to Dubai and used his savings to buy the car after being assured by the seller that it was in good shape.
However, after the purchase, he realised the car was damaged after checking a persistent clunking noise. The car had been imported from the US, where it had been written off in an accident and rebuilt using other vehicle parts, a check of the chassis number revealed.
He finally managed to sell the car for Dh12,000.
“Buying a used car is best for your resale economics, and when looking at used cars, make sure you get it inspected at a garage to uncover any hidden damages,” CarSwitch’s Mr Hammad warns.
Mr Chaar says when buying a second-hand car, there is a risk that it has had its mileage rolled back on the odometer, which is the equivalent of overpaying for a car.
Or a customer can end up with a car that has mechanical issues and requires a large amount of money to repair, he says.
Finally, a customer may unknowingly buy a car that has been in a major accident, which means they overpaid compared with market prices, Mr Chaar says.
5. Not considering market conditions
Mr Willetts says the price of cars that are almost new, such as 2021 or 2022 models, is currently about the same as that of new cars because stock is low due to the global shortage of semiconductors, says Mr Willetts.
This is artificially increasing the price of almost new cars because the availability of new cars has massively diminished.
“People think they are getting a good deal by buying newer used cars, but if they wait for two to three months, they can get a brand-new car by paying 5 per cent to 10 per cent more. Prices of nearly new cars are unusually high,” he says.