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Major changes on the horizon for Dubai`s car rental market

Car rental companies across Dubai will need to make significant adjustments to their business models as current market trends show a major shift towards leasing. Bob Farrow, Vice Chairman of the…

Car rental companies across Dubai will need to make significant adjustments to their business models as current market trends show a major shift towards leasing. Bob Farrow, Vice Chairman of the Dubai Car Rental Group and General Manager of Hertz UAE, said that growth of the rental market in Dubai was being now driven by expatriates arriving in the country on short-term work contracts and corporate clients rather than by tourists.



The Dubai car rental market is predicted to grow by 20 per cent in 2007 largely due to a growing trend for new residents to lease rather than buy a car and an increase in the corporate leasing business.



“Our research shows that there is an increasing number of people in the UAE who want an easy and reliable mode of transportation but don’t want to commit to buying a car, perhaps because they are on short- to medium-term work contracts,” said Farrow.



“For many people, particularly those who don’t know how long they will be here for, leasing a car can work out as a more cost-effective option when the various costs of buying are factored in, such as insurance, servicing, maintenance and annual registration. Leasing is also hassle-free with all the paperwork taken care of by the rental company.”



Hertz UAE, part of the Al Futtaim Group and one of the largest car rental companies in the emirates, gets 55 per cent of its business from leasing and 35 per cent from medium term and monthly rentals. In contrast short term rentals by tourists only account for 10 per cent of the business, down from 20 per cent in 2002.



“The pattern of business here in the UAE is the total opposite to that of Hertz in the UK where the majority of business comes from short-term and tourist rentals with only 3 to 4 per cent of business from long-term rentals,” said Farrow.



“In Dubai tourists tend to rely on hotel shuttle bus services along with the city’s very good taxi system and are happy to avoid Dubai’s traffic congestion, while a large portion of arrivals are visiting friends and relatives who provide transport.”



He said that the move towards leasing will mean increased maintenance costs for rental companies as cars leased over three to four years need far more service and maintenance than cars used for short term rentals, which are kept in the fleet for only around nine months.

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