Car rental companies see an increase in monthly rentals only weeks after the UAE Central Bank made it harder to buy a car.
New rules push car buyers to rental companies
Car rental companies say more consumers are now leasing cars on a monthly basis as changes to Central Bank rules have made it harder to buy cars.
A growing expat population and shortage of Japanese models have also been cited by rental companies as reasons for the increase in short term leases.
Hertz, the world's largest car rental company, saw a 15 per cent year-on-year increase in monthly rentals across the UAE in June.
"We have seen strong growth in our monthly rental business," said Nigel Johnson, the managing director at Hertz, which is part of the Al-Futtaim Group in the UAE. "It's very hard to say what the underlying motivation is, but customers are buying less after the central bank changed its rules, we have seen an uptick in volumes."
New Central Bank guidelines on automotive financing, which were implemented in May, require individuals to stump up a 20 per cent deposit on all car purchases. The rules also declare that the car loan should not exceed 50 per cent of the buyer's monthly income.
Car dealers have complained that the rules are too strict and have put off many consumers from buying new cars, which has led to a fall in sales in June.
"Obviously there's been an increase on monthly rentals after the central bank changes, because people who cannot buy a car either rent a car or get a taxi," said Rahul Singh, general manager for Thrifty Car Rental UAE.
The increase has prompted the company to launch a scheme where consumers can lease a car for a year, then buy it at an agreed market price once the rental period is over.