With less than 3 months to go before the implementation of VAT in the UAE, the dynamics of the automotive industry are set to be changed drastically. Value Added Tax will be implemented in the UAE from January 1, 2018, and while a 5% VAT might not seem too big for inexpensive new items, but it will surely hike the price of expensive items such as new cars to a notable extent.
Many speculations have been made about the implications of VAT on the automotive industry, one of which subjects to a massive drop in sales of new cars once VAT is implemented. With all the uncertainties around about the impact of VAT on the automotive industry of the UAE, the last quarter of 2017 becomes extremely crucial for both dealerships and car buyers.
Also read: VAT to be implemented in the UAE: Understanding its Impact on the New and Used Car Market
Implications of VAT Implementation on Automotive Industry
The implementation of VAT on new cars is expected to change the whole outlook of the automotive industry and will have both short term and long-term effects. The sales of new cars are expected to decrease considerably as car buyers will look to avoid 5% VAT on the purchase of new cars and an additional 5% VAT on the insurance premium of cars by buying a new car before 2017 ends. Car buyers are already rushing to sell their used cars in order to buy their next car before the VAT is implemented.
The sales of new cars are expected to become stable only when people will get adjusted with the Value Added Tax on new items and that can take a considerable amount of time. In order to minimize the expected shortfall influenced by VAT implementation from January 1, 2018, onwards, dealers are looking to maximize the sales of new cars by offering discounts and promotional incentives to car buyers on the purchase of new cars in the last quarter of 2017.
Car Dealers to Offer Substantial Discounts on New Cars
Other than foreseeing the impact of VAT implementation on the car market, the dealerships are also willing to offer some amazing discounts to attract car buyers because 2017 has proved to be a bizarre year for new car sales. A significant drop of 15% has been observed so far in new car sales this year when compared to the figures of 2016.
As per the market sources, the dealerships are expecting a 15-20% rise in sales volume in the Q4 of 2017 before the implementation of VAT. Some dealers have already started their promotional offers on new cars while others are expected to follow suit soon. An uplift in the sales of new cars in the fourth quarter of the year is extremely critical as it will not only settle the gains of dealerships to some extent but will also provide a smooth cushion against a massive drop in sales of new cars that is expected to hit the car market following the VAT implementation.
Also read: 7 Tips on How to Buy a Car in UAE
Car Buyers Look to Buy New Cars before VAT Implementation
Most of the car buyers who were planning to buy a new car in 2018 or were waiting for any seasonal promotional offers on new cars are now looking to make the most of this opportunity where dealers are willing to offer any kind of discounts to push their sales upwards before the implementation of VAT.
Buyers will actually be able to avail some extraordinary benefits by buying new cars in addition to VAT-based benefits that include:
- Strategic discounts by dealers to boost their sales so that they can compensate the decline in sales this year
- Seasonal discounts as the new models roll-in and the older model inventories need to be cleared out
- Additional discounts or bundled insurance packages in order to compete with other dealers to generate maximum sales in the last quarter of 2017
- Extended warranties, lengthier service agreements, discounted or free car insurance and other incentives to further increase the sales foreseeing the expected drop in sales immediately after the VAT implementation
These benefits and pre-VAT based incentives on new cars make the last quarter of 2017 an ideal time to buy a new car in the UAE.
Bottom-line
While the car buyers set their eyes on buying a new vehicle before the implementation of VAT, the dealers and car brands are ready to introduce some of the most incredible discounts and promotional offers in order to sell maximum cars and end the year 2017 on a good note. Dealers will try to compensate for the existing and foreseeable losses by offering incentives and discounts on new car sales. This is why Q4 of 2017 is an ideal time to maximize the profit for both dealers and car buyers as the automotive industry awaits a major paradigm shift ahead of the VAT implementation in the UAE.
If you are planning to upgrade your vehicle before the implementation of VAT, then don’t forget that with us, you can sell your used car in just 30 minutes while all the post-sale paperwork is handled by SellAnyCar.com’s team.
