Car rental companies say more commuters are leasing cars on a monthly basis after changes to UAE lending rules made it harder to buy a vehicle.
A growing expatriate population and the new Central Bank cash down rules have been cited by rental companies as reasons for the increase in short-term leases, while a shortage of Japanese models have also been cited as the reasons.
The world's largest car rental company, Hertz, reported a 15 percent increase in rentals across the Emirates last month compared with June last year. Nigel Johnson, the Managing Director at Hertz UAE said, "We have seen strong growth in our monthly rental business," a part of the Al-Futtaim Group. "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 car financing require borrowers to stump up a 20 percent deposit on all car purchases.
The rules also declare the car loan repayments should not exceed 50 percent of the buyer's monthly income. Car dealers complain the rules have become too strict, putting off many consumers from buying new cars. This has led many dealers to report a drop in sales last month.
Necessity is the mother of invention and this sudden demand in car rentals has prompted the company to launch schemes where consumers can lease a car for a year, then buy it at an mutually agreed market price once the rental period is over.
A Toyota Yaris can be leased at a rate of about Dh1, 600 a month and then bought at the end of the year for about Dh35,000, Mr Singh said. "We felt many people wanted to own a car but cannot, because of the 20 percent deposit," he said. Budget Rent A Car says 'nothing new' as it has always offered customers the opportunity to buy, but the process was not well publicized in the UAE. "We have seen a big shift from people renting for the long term to lower periods," said Dominic Hagerty, the sales manager in the UAE for Budget. "It's hard to quantify and evaluate why."