Driven away by the law? Drivers would rather rent than buy

Driven away by the law? Drivers would rather rent than buy

We hardly think a law that's in place to protect buyers and car companies is the reason drivers are opting to rent. But Jacqueline Gomes appreciates this more conscientious trend.

July 26, 2011 1:58 by Eva Fernandes

Car rental agencies in the UAE are apparently experiencing a huge demand for renting vehicles on a monthly basis from both expatriates and visitors. Hertz reported a 15 percent increase in rentals across the Emirates in June compared to the same month last year, according to an article in Gulf News.

The increase is attributed to the new car financing government regulation that has put an end to the 100 percent bank financing fee of yesteryears. It states that they buyer must give a 20 percent deposit and that the car loan must not exceed 50 percent of the buyer’s monthly income.

So could it really be that drivers are opting to rent rather than buy because they don’t want to pay 20 percent upfront?

Nigel Johnson, Hertz MD, was equally hesitant to jump to this conclusion, telling GN that it was difficult to say whether the growth can be attributed to the government regulations. “I would not go as far as to suggest that there is a boom in car rental business in the UAE. However, car rental companies see some strong growth on year-on-year volumes of reservations.”

Kipp so happens to have been milling around car showrooms along Dubai’s Sheikh Zayed Road a couple of weeks ago and was surprised by the seemingly endless number of people showroom-hopping, shopping around for a new car.

While there have been reports in the local media that new car sales have been on the decline, Kipp speculates that it’s not just the new ruling that may have led drivers away from buying new cars and into the arms of the auto rental industry.

There are a number of factors that could attribute to this growth. For starters, the economy hasn’t fully recovered at all and renting a car is less of a risk then buying one on loan. And what of the increasingly popular lease-to-own option that may be more appealing to the more wallet-conscious drivers.

It is a tempting idea that a Toyota Yaris can be leased at a monthly rate of about Dh1, 600 and eventually bought at the end of the year for about Dh35,000 or so when the current price of the car is around Dh51,000-61,000.