If you’ve recently landed in Dubai or are a long time resident feeling the pain of rising costs, you may have compared the advantages of owning a car, renting or ride-hailing in the UAE, particularly from a financial point of view. Each has its pros and cons, so to understand these purely in financial terms the experts at CarSwitch.com have crunched some numbers to bring to you some insightful findings.
To explore each option, we only considered ride-hailing apps as hailing RTA taxis in Dubai can be challenging depending on where you reside. To keep the comparisons fair and consistent, we used a Lexus ES300 in each option so that similar driving experiences are considered. Finally, we assumed your daily commutes come down to an average of two 30 km trips a day, 6 days a week, so hitting an average of 20,000 km a year with half of them crossing a Salik gate.
Owning a mid-size mass luxury sedan such as a Lexus ES 350 will cost approximately AED 35,000-40,000 per year. We analyzed data of a 1-year-old Lexus to keep it comparable to driving a rental and ride-hailing. The individual costs are:
- AED 25,000-30,000 in car depreciation as ultimately the car will lose quite a bit of value over its lifetime (see further details here)
- AED 3,000-4,000 for comprehensive insurance
- AED 1,000 in registration related costs such as the annual inspection fees
- AED 2,750-3,250 for cleaning, service, and maintenance costs
- AED 4,000-5,000 in Salik and fuel costs assuming January’s ~2 AED per liter and an average consumption of 9 liter / 100 km for the Lexus ES350
It goes without saying that we have assumed you to be a great driver. Which means no traffic or parking fines, or additional fees due to accidents
Renting the same type has less complicated costs primarily because registration, service, and maintenance costs are taken care of for you and it adds up to about AED 60,000-65,000 per year. Namely:
- AED 55,000-60,000 per year in rental cost, as monthly rates are typically AED 5,000-6,000 due to seasonal peaks and slumps and most agencies provide discounts on longer-term commitments
- AED 4,000-5,000 in Salik and fuel costs which are similar to that of owning a car
Ride-hailing is, of course, the simplest in terms of cost calculations and risk factors such as fines or accidents. Its associated costs add up to a grand total of AED 45,000 per year, assuming an average base fare of AED 8 on top of AED 2 per kilometer as the rates vary on time and demand. An added perk is being chauffeured around without the headache of driving yourself, and there is certainly some economic value in clearing those extra emails or expanding your horizons in the latest book you grabbed.
Therefore, over the course of the year, it would seem owning a car is the right financial choice. However, for the economics to play out well you would have to keep these key cost drivers in mind:
- You need to buy used car as a new car has a much steeper depreciation in the first year, which is the largest cost associated with owning a car!
- The car you buy must be in good condition to avoid unanticipated repairs which could turn out to be costly
- The timeframe needs to be close to a year or more, as if you only need a car for a few months then owning becomes costlier.
This assessment was conducted by CarSwitch.com which is the UAE’s marketplace for pre-inspected used cars. CarSwitch’s value proposition is to tackle the two critical cost advantages of owning a car: it needs to be a used car so that the big initial depreciation can be avoided, and it needs to be in good condition. Accordingly, CarSwitch pre-inspects every car puts the results on their website and adds a warranty to every car so that the economics always play out well.
