Contrary to what car sellers in the UAE might think, recent trends indicate a lot of buyers are not willing to negotiate and want to purchase their next car in a quick and hassle-free way. After all, digital avenues to search and compare as well as online valuators have made it easier than ever before for buyers to find out the fair price of any used car. The experts at CarSwitch.com, an online marketplace for certified used cars in UAE, recently crunched the numbers to reveal some major shifts in how car sales take place in the region.
Negotiation is far less pronounced in the buying journey
Long gone are the days when every car sale involved lengthy and time-wasting negotiations. While dealers, and other professional buyers, may continue to negotiate aggressively to improve their margins, an increasing number of private buyers do not.
CarSwitch analyzed over 10,000 transactions conducted through its platform from 2019 to present and found that a whopping 80% of transactions occurred within AED 5k of the cars advertising price. In half of these transactions, that amounted to a less than 3% discount from the advertised price. Specifically :
- ~40% of cars were sold within AED 1k (within 3%) of the advertising price
- ~40% sold within AED 5k (within 10%)
- ~20% sold at more than a AED 5K (greater than 10%) discount
It is interesting to note, the negotiation outcomes did not differ between cash and auto loan buyers. Suggesting auto loan buyers are generally not willing to pay more, and sellers are generally unwilling to offer discounts to cash buyers (as ultimately the seller is keen to receive payment, whether its from the buyer or a bank seems to be of little consequence)
Sellers need to rethink their strategy
Despite the fact that most car transactions (80%) occur within AED 5k of the advertising price, sellers continue to (a) expect their cars to yield a higher sales price than they eventually do (b) expect to have to haggle with buyers and build in further negotiation margin. As a result, only ~45% of transactions actually occurred within AED 5k of the sellers initial asking (or expected) selling price. Specially,
- ~10% of cars were sold within AED 1K (within 3%) of the sellers initial asking (or expected) price
- ~35% sold within AED 5K (within 10%)
- And ~37% sold within 15K (within 20%)
As a result, a car that would eventually sell for AED 100k, only really picks up traction when it is advertised around AED 105k. However, sellers often begin advertising it at AED 115k which private buyers perceive as too expensive and do not bother contacting the seller to haggle their way to a sale. The seller ends up waiting a few days, sometimes weeks, to reduce the price to a point where it begins to draw buyer interest.
Why fewer buyers are willing to negotiate
With free online car valuation tools and digital avenues of searching and comparing cars at their disposal, buyers don’t have to rely on guesswork and haggling anymore. They can find out how much a used car is worth with a few clicks. Instead of wasting time on haggling for a car with an unrealistic listing price, they can just find the right used car with a fair listing price and buy it quickly or use advanced price tracking features on portals like CarSwitch.com to be notified once the price drops.
As price transparency continues to increase, so do sales at or close to listing prices. CarSwitch’s recent analysis of sales confirmed this trend. In 2018, 35% of cars were sold at the listing price, whereas in 2020, cars sold at the listing price increased to 50%.
Covid-19 has accelerated this emerging trend
The Covid-19 pandemic has changed the picture recently. Earlier in 2020, 10% of cars were sold at their initial listing price. On the other hand, in June, a negligible number of cars were sold at the initial listing price, driven by an increase in buyer negotiating power as buying power gradually diminishes with uncertainty, job loss or reduced wages while the market floods with used car inventory as rental agencies look to retire fleets and private sellers are in search of financial relief or relocation.
How online platforms are further reducing the need to negotiate
Online platforms have brought a lot of transparency to the used car market, displaying inventory that may have otherwise been hidden to some, and enabling easy comparisons. The latest platforms are further accelerating this trend through advanced features which further empower consumers. As one example, CarSwitch.com uses Artificial Intelligence techniques to analyze thousands of real transactions on its platform and provide real time price guidance to sellers ensuring cars are priced right from day one and are sold quickly.
The insights are also available in CarSwitch’s free online car valuation tool They have also recently extended price guidance tools to buyers to aid in their search journey. Buyers can also subscribe to price drop notifications to become aware as soon as a car is priced within their desired range, and even make an offer directly to the seller through the app. The digitization of traditional haggling reduces friction in deal making and makes for a far quicker and amicable sale. Buying and selling used cars in UAE has never been easier.