Whether it is a new law implementation or a new tax reform, the impact of it is widely seen across segments. Here is how the 5% VAT will affect the new and used car market in UAE.

Starting January 2018, five percent Value Added Tax (VAT) will be implemented in the UAE and is expected to push retailers and customers towards buying the big-ticket items before the VAT is implemented. Although it is the lowest VAT rate in the world but there will be a rush for car buyers to buy a new or used car before the prices see a hike as a result of 5% VAT implementation.

How will the VAT Implementation affect the Car Market in the UAE?
Given UAE’s car market is a centre of attention for most of the major international car makers, there will be a sudden rise in the new purchases before the 5% VAT gets applied in January accompanied by a sudden fall post its execution. Because the retailers will want to have continuous sales, there will be discounts and sales on new cars to attract maximum buyers towards their cars.

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. Given the increased new car prices, the demand for used cars is likely to go up thereby causing a price hike in their actual costs too.

Is it the best time for residents to buy a new car in the UAE?
Yes, if you are planning to buy a new car next year it is advisable to but it now because not only will you save the 5% VAT but there will be lucrative offer discounts and other profitable deals on new car purchases before January 2018 too.

Why should you buy a new car before the VAT Implementation?
We are sure you don’t wish to pay an extra 5% on the purchase of a new car. 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

Having said that, the car market in UAE is set to witness a temporary but significant paradigm shift as a result of the announced VAT of 5%.