Is it better to rent or to buy? While the price of a new car has fallen, many drivers are happy taking advantage of cheap rentals as companies fight for business.
Your guide to renting or buying a car in the UAE
After six-and-a-half years of living in Dubai, Simon Clough has still not found a reason to buy a car. Mr Clough, an art and design professional from Britain, has rented a Toyota Corolla from Hertz for almost three years, a common experience in a country where many change jobs and travel often. "At the time I was new in Dubai, I didn't have sufficient money for a deposit," he said. "Basically, we decided we didn't want the hassle factor to worry about. Every six months we get to change the car, we get a newish car and I don't have to worry about maintenance or oil changes."
When his car was smashed up in a bad accident a few years ago, he had a brand-new vehicle delivered to his home within two days, skirting the headache of insurance claims and police reports. Mr Clough pays just under Dh2,000 a month, a rate that has held constant for the years he has had the car. He estimates that 30 per cent of his friends who are long-term residents of Dubai have chosen to rent rather than buy.
But in the last few months, Mr Clough has begun to rethink his strategy as the effects of the financial crisis spread to car dealerships across the country. Prices for rentals and new cars have fallen across the board, analysts say, and the consumer is in a position to push car companies as hard as possible to get the best deal. Dealerships are grappling with reduced demand for both new cars and rentals, said Jose Paul, a car industry analyst at Frost & Sullivan, a consultancy.
"Financing pressures have eased marginally but the appetite for new car purchases continues to be low among customers," he said. "Many customers have either pushed their purchases or have opted for cheaper used-car options." Consumers are faced with "non-availability of loans, lack of job security and also reduced or uncertain income levels", Mr Paul said. Rental rates, which initially stayed high at the beginning of the economic downturn, have "come down marginally", he said.
"Apart from being off-peak season, this is a result of companies looking to make renting an attractive and viable option for many customers," he said. "New-car dealership groups have utilised their rental business division to reduce some of the vehicle stock and hence make reduced rental options more attractive." Thrifty, one of the largest rental firms in the UAE, with a fleet of 14,750 cars, has several promotions running with discounts of up to 50 per cent off, said Sounitre Sinha, the firm's marketing manager. Business is down between 15 and 20 per cent compared to July of last year.
Although costs for new cars have fallen steeply for consumers, the same promotions are not available for rental companies, meaning Thrifty's costs remain relatively unchanged. "This has been a trend right since the downturn happened," he said. "We are hopeful for things to get better after summer and Ramadan." Mr Sinha said rates have fallen mostly in Dubai and the northern emirates: "Abu Dhabi is not affected as much, per se."
The effect of the downturn on rental rates has not been uniform. Some companies' rates remain as high as ever, while other firms have slashed prices, especially for weekly and monthly rentals. A survey of daily rental rates suggests that comparison shopping is a must before signing a short - or long-term rental. The best deal, as might be expected, is the tiny Toyota Yaris, which costs Dh110 to rent for the day, including collision insurance, at several locations in Abu Dhabi and Dubai. But prices vary widely. At Budget, the daily rental rate for the Yaris - Dh160 - contradicts the company's brand name.
At Europcar, the cheapest option, the Chevrolet Aveo rents for Dh182 per day, according to rates published on the company's website. In most cases, the international names had higher rates than local businesses, but the pattern did not hold true in all cases. Hertz, for example, quoted a price of Dh110 per day for a Yaris, as did Thrifty in Dubai. For customers seeking a slightly roomier vehicle, price differences do not necessarily hold the same pattern as for the cheaper cars.
Sahab Rental Car, a small Abu Dhabi-based firm, quotes a high price of Dh138 for the Nissan Tilda, even though it charges Dh110 for the Yaris, among the best rates in the capital. Fast Car offers to rent the Tilda for Dh112. The lesson? If you upgrade your model, do not necessarily stick with your current rental firm - another round of phone calls is the prudent course. The international brands such as Budget and Europcar do offer high-end brands but collision insurance rates push up the total cost markedly. Budget rents the Mercedes E-Class 280 for Dh1,166 per day; Europcar rents the same for Dh1,031.
Rates for monthly rentals vary just as widely. At Sahab in Abu Dhabi, for example, the cheapest option costs Dh1,700 per month, while Advanced Rent a Car charges Dh2,050. At Europcar, the price is Dh2,925 for a Chevy Aveo, while a Toyata Yaris at Budget runs around Dh3,478 Mr Sinha, of Thrifty, said customers are shopping around more than ever before, and are more reluctant to commit to longer-term rentals in an uncertain economic time. With reduced income and questions about job security, "renting is definitely an attractive option for many customers", Mr Paul said.
"This has led to many customers looking for short-term options rather than for a long-term financial commitment," he explains. "Cars on rent provide this option, with the customer holding the cards on whether to incur the expense or not." Renting in the UAE is still a good deal when compared to rates in the US and Britain. At Heathrow Airport, Thrifty rents the tiny Renault Clio for Dh318 per day, or Dh164 per day for a one-week rental. Carehire3000 advertises a rate of Dh129 per day for a weekly rental.
At Houston International Airport in the US, the cheapest option for consumers facing petrol sticker shock is the Chevrolet Trailblazer, which rents for Dh267 per day for a weekly rental. A recent story in the New York Times noted that average rental rates in the US have increased 73 per cent in the last year, as car companies slashed the size of their rental fleets by selling cars to the used market.
In the UAE, the car market is driven as much by the cyclical climate as the economic downturn, and analysts note that prices for both rentals and purchases normally rise again in the autumn. The best time to make a decision could be this summer, a fact not lost on Mr Clough. He has been keeping his eye on falling prices for car purchases, and evaluating them against rates for rentals. Tired of struggling with his Toyota Corolla for space on the motorway with massive 4x4s, Mr Clough is looking at finding a bigger model, hopefully at a steeply discounted rate, at one of Dubai's used car lots. "We don't have much road presence with our Corolla. Now we're looking at a second-hand 4x4," he said.
Thrifty Locations across Dubai Toyota Yaris Dh110 per day Sahab Rental Car Hamdan Street, Abu Dhabi Toyota Yaris Dh110 per day Nissan Tilda Dh138 per day Hertz Al Falah Street, Abu Dhabi Toyota Yaris, Dh1820 per month, without collision waiver insurance Go Rent A Car Bur Dubai Toyota Yaris, Dh1600 per month No collision insurance