Petrol has gotten damn expensive, hasn't it? Perhaps so much so that you're wondering if your petrol-guzzling Jeep (or other SUV brand you're probably driving around the gulf) is worth it anymore. According to historic fuel rates, On average across Super 98, Special 95, EPlus 91, and Diesel, the price of fuel in the UAE has gone up from 2.55 to 4.07 AED per liter from January to June, 2022.
Once you've decided that enough is enough and buying an EV is the way forward… on one hand, you can buy a car — and on the other, you can rent one. But, which is the best move? As it turns out, the answer may not be a simple financial calculation if you're reading this in 2022.
The argument for buying a car is that you'd be owning the asset itself, which you can then sell at a later date. When renting, however, the rental amount would not be contributing towards ownership of the car in any way — in fact, you won't be owning the car at all.
Unlike homes, though, the value of cars doesn't go up in value. In fact, when you simply drive a new car out of the dealership, their price drops instantly — often varying depending on the make of the car and its resale value. So, effectively, cars depreciate in value over time — or do they…?
You see, in the current state of the world, there is a chip shortage. And no, we're not talking about a shortage in Lays or Pringles, but rather, a shortage in those little microchips that power your electronics, including cars. This shortage has caused a dent in the supply of new cars in the market, causing a spike in the price of new and existing cards. Meaning, had you thought of selling your car last summer in 2021, it's a good thing you didn't because the secondary market can yield you more now.
But, this shortage will not be there forever. So, these are the dynamics to keep in mind right now, you can't expect that a car you buy now will not depreciate as much in the next 5 years as it would have over the same time period had you bought it in 2017. But the other factor to consider is what type of car to buy as well.
Nowadays, electric vehicles (EVs, for short) are all the rage, largely driven by rising oil prices, Elon Musk's antics on Twitter, and people's general ESG awareness. So, if you buy a new car now, given that there is no longer a chip issue by 2027, the depreciation could be even more over a 5-year time horizon, as fewer people will want this type of car.
All that being said, given that the supply of EVs in the GCC markets is quite tight at the moment — as with all cars, given said chip issue — it may not be worth buying a new, non-EV car now after all. Instead, renting may be a more viable option given all these variables, until the supply of EVs in the market would allow for you to buy one