Five percent Value Added Tax (VAT) will be implemented in the UAE from January 2018, a news that has received mixed reactions from stakeholders all over the UAE. It is expected to create an immediate rush for car buyers to buy a new or used car before the prices see a hike as a result of VAT implementation. Considered as the lowest VAT rate in the world, the announced VAT is not expected to have any major long-term effects but will push the retailers and customers towards buying the big-ticket items before the VAT is implemented.
How will the VAT Implementation affect the Car Market in the UAE?
The car market in the UAE is a center of attention for most of the major international car makers, all thanks to a dedicated customer base of car buyers in the country. The prices of new cars will be increased from next January in line with the newly introduced VAT that will be applied on every new car purchase once implemented.
A trend of accelerated new car purchases before the implementation of the new VAT is expected to be followed by a significant drop in purchases after the VAT implementation, and that is something all car brands must be wary of. This could actually go in the favor of the car buyers as car brands might launch initiatives in shape of discounts and other deals on new cars to attract maximum buyers towards their cars before the VAT gets implemented.
Also read: 7 Things Which Impact the Resale Value of Your Car
How is VAT Expected to Affect the Used Car Prices in the UAE?
The used car market of the UAE will also observe a change in its dynamics and this change will be more evident after the VAT implementation. The demand of used cars will increase as the car buyers will be inclined to buy used cars instead of buying new ones with applied VAT prices, and this increase in demand for used cars will actually cause their prices to hike.
The maximum advantages from the VAT implementation will be availed by the used car dealers. The 5% VAT, once implemented, will push the sales of used cars and that will allow the dealers to ask for higher prices for these used cars.
Is It the best time for residents to buy a new car in the UAE?
The assumed fast-tracked purchases of the new cars before January 2018 is expected to ignite the competition between top car brands of the UAE. Car brands in the UAE will try to outpace their rivals and to attract the maximum attention of buyers will expectedly offer discounts and other profitable deals on new car purchases. This is why residents of the UAE who were planning to buy a new car next year, would change their mind and will try to buy a new car before January 2018.
Why should you buy a new car before the VAT Implementation ?
No one would like to pay an extra 5% on the purchase of a new car, but after January 2018, the price of every car will rise by 5%. So for example, if you buy a new car worth AED 100,000 now, you will be able to save AED 5,000. This money which you save can be used in a number of way, such as:
- Buying insurance for your new car
- Buying extended warranty for your new car
- Purchasing some add-ons packages offered by the manufacturers when you buy a new car
- Installing the latest infotainment system in your new car
- Installing a navigational system
- Embellishing your new car with better alloy rims, wide body kits, custom head and tail lights and a lot more
Roundup
The car market of the UAE is set to witness a temporary but significant paradigm shift as a result of the announced VAT of 5%, and in order to avoid paying extra money for the new and used cars, car buyers should consider buying either a new or used car anytime soon before this year ends. The used cars are also expected to be costly after January 2018, so any time between now and December 2017 is the ideal time to buy a car in the UAE.
If you are looking to sell your old car quickly in order to buy a new one before January 2018 starts, sell your used car with SellAnyCar.com as you can sell any used car in just 30 minutes while all the post-sale paperwork is handled by SellAnyCar.com’s team.
