Five Tips to Beat Depreciation in the UAE

The rate of car ownership in Dubai is quite high, with there being one car for every two residents in the emirate. This is higher than the rate in many European and American cities. Most people in Dubai see their vehicles as a workhorse that gets them to and from work and to the places they want to go. Many see their car as a symbol of their status and use their vehicles to showcase the success they have achieved in life. Very few see their car as an asset in which they have invested a considerable amount. One main reason why we can consider our vehicles as true assets is that depreciation takes a heavy toll on the value of a vehicle.

As soon as a car is driven out of a showroom, its price drops by 15-20 per cent. Generally, the value of a car depreciates at least at the rate of 10 per cent every year and by the time you have used your vehicle for five years, you can expect to get less than half the amount you spent on it in the resale market. In other markets like the United States, Australia and Africa, people use their cars for a relatively longer period, which can be as long as ten years. In the UAE, however, the average duration for which owners retain their cars is only three years after which the car is sold as a “used car”. As they switch cars on a regular basis, people in the UAe end up losing a considerable amount of money in the long run.

How can we try and counter the effects of depreciation on an asset like a vehicle in which we invest a considerable amount? Though it is not possible to completely eliminate depreciation, there are ways to reduce the effect of depreciation on your hard earned money.

The experts at CarSwitch, which is the first online UAE platform for the purchase and sale of certified used cars have a few tips to help you maintain the value of your car and thus save your dirhams.

1. The brand of the car you buy counts: Depreciation can be as high as 50-60 per cent or as low as 30-40 per cent, all depending on the brand of your car. Don’t buy models which are not commonly used as the demand for them in the resale market will be low. Generally, Japanese brands like Nissan, Honda and Toyota have good resale value.
2. The Age of the Car Matters: The biggest drop in the value of a car is in the first year of ownership. Hence, it makes sense to buy a car that is slightly used and will cost a lot less than a brand new car and sell it when it is about five years old before upgrading. Generally, cars lose around 20-25% of their value in the first year and only 15 to 20% in the subsequent years.
3. Maintain Accurate Records of the Service History: It is important to keep a detailed record of the service history. Make sure that it is always taken in for service and maintenance either to the authorized dealer or reputed garages. Many buyers will ask sellers about the service history of the car. If you have detailed and accurate service history, you will get a better price for your car.
4. The appearance of the car is important: The environmental conditions in Dubai are such that cars need to be washed and detailed on a regular basis. As far as possible, always use covered parking.
5. Warranty is the name of the game: Cars that are still under warranty will fetch a higher price. Almost all vehicles sold in the UAE come with a five-year warranty and for a small fee, it is generally possible to extend this warranty for a longer period. That way the buyers will no longer have to worry about post-purchase repair bills.