UAE Used Car Growth Opportunities

UAE Used Car Growth Opportunities

The UAE’s used car market experienced unprecedented growth in 2021. On the one hand, the global shortage of microchips impacted new car supply, boosting the demand for used cars, on the other hand, the recovery of market sentiment in the UAE and EXPO 2020 Dubai (postponed to 2021) boosted the Vehicle Miles Traveled (VMT) in the country. As a result, the used car market in 2021 in the UAE was a seller’s market, with a major challenge being sourcing of used cars.

The increased demand has driven up the residual value. Popular models, depreciated much lesser in 2021 compared to 2019. The average price per vehicle also went up by almost 10% compared to pre-pandemic levels in 2019. Car owners in the UAE were incentivized to sell their vehicles at a good value.

With market growth, the industry has also witnessed many innovations in customer experience and business models. In general, a few market pioneers have led the way by increasing service standards and aftersales assurance to improve customer confidence in used cars.

Most sellers have adopted digitalization in car listing. Meanwhile, franchised dealers and major independent dealers have immensely taken to online payment and financing. Other value-added services, such as standard inspection and warranty service, have saved customers time for due diligence. In general, the process and time spent on purchasing a used car in the UAE have shortened, and the ease of making a purchase has improved.

In the post-pandemic era, the UAE’s used market is expected to grow at a CAGR of 8.3% from 2021 to 2025. More than 1 million used cars are expected to be sold by 2025, driven by the competitive growth of franchised dealer Certified Pre-owned (CPO) and organized independent dealers.