Used car market flourishing

Strolling into a showroom and driving off in a shiny new car was common practice three years ago. The rush for latest models was so great that motorists signed up on waiting lists as dealers struggled to keep up with demand.

"The market in the UAE and the GCC traditionally was always a new car buyer market," says Jeff Mannering, the managing director for Audi in the Middle East. "People had a lot of disposable income." But times have changed since then with the global economic crisis putting the brakes on surging growth. Although sales of new models in the Emirates are starting to recover, dealers say the second-hand car market is booming.

"I think after the financial crisis that people are a little bit more careful with the money they spend and used cars are becoming a very considered option for a lot of people," Mr Mannering says. Car sales in the Emirates were hard hit last year as nervous banks tightened lending standards and virtually turned off the tap of once free-flowing car finance. Consumers shied away from big-ticket purchases and began keeping their cars longer. There are no official figures but dealers estimate new car sales in the Emirates fell by as much as 40 per cent.

Meanwhile, people laid off in the property and financial sectors tried to sell their cars before leaving the country, triggering a flood of used vehicles on the market. Now as the region moves towards recovery, sales of new cars have begun to improve from last year's slump. Even so, it is in the used car market that sales have really got into gear, dealers say. Car giants in the Emirates such as Audi and General Motors (GM) are introducing special deals to increase their slice of the second-hand car sector.

GM introduced its certified pre-owned vehicles programme two years ago. Sales grew steadily in 2008 and last year, while in the first half of this year they jumped 28 per cent, says John Passadis, the regional sales director for GM. "Used car sales is going to grow," Mr Passadis says. "In any mature or more developed market, used car sales may even reach the volume of new car sales. In these markets, it [represents] not more than 20 per cent and there is a lot of opportunity."

The US car maker is trying to direct more of those sales through official dealerships, rather than private sales through newspaper ads or used-car showrooms. "That is why you are seeing the numbers increasing," Mr Passadis says. "Manufacturers are channelling more of that business through the authorised dealers." BMW's used car sales have also increased. Sales under its certified used car programme, BMW Premium Selection, climbed 89 per cent to 1,031 cars across the Middle East in the first half this year, compared with the same period last year.

Leigh Cleaver, the used car manager for Daimler Middle East, expects sales of used cars to rise between 10 and 12 per cent this year. "There was a lot of stock around, caused by different reasons," Mr Cleaver says. "Whereas this year there is far more accuracy in terms of the sales rates that we're working with, and the vehicles that are out in the marketplace." Brett Chimes, the sales manager at Reem Automobile, says second-hand sales at its dealerships were equal to last year. But the types of cars being sold has changed.

"The German sector of four-wheel drives is our best selling sector, where as before it was the sports car market," he says, adding sales of used Ferraris and Lamborghinis have dropped by about 50 per cent. Prices have also started to level off. "They've not gone up but certainly stabilised and a lot more realistic than they used to be," Mr Chimes says. Business also continues to be brisk through classified sales.

On Dubizzle.com, car-related postings have increased in Dubai and Abu Dhabi, says JC Butler, the co-founder and managing director of the classified ad website. Last month there were 12,446 postings advertising cars for sale, up from 9,596 in July last year. In Abu Dhabi, there were 1,799 ads for car sales, up from 315 in July last year when the portal was launched. Mr Mannering says as demand for used cars grows, he expects more authorised dealerships and second-hand car showrooms to open.

"It will become a lot more important because people in the UAE, especially the expats, are used to a really stable used car market and used to trading cars in," he says. "I think the dealers and traders will become a lot more sophisticated and you will see more used car dealers, and the manufacturers and dealers become a lot stronger in used cars than they used to be." aligaya@thenational.ae