Rain-damaged cars may hit pre-owned market, buyers warned

Buying cars from the unorganised open markets, classified websites or small dealers a very risky bet: Industry officials

Industry executives have advised UAE residents planning to purchase preowned vehicles in the next six to 12 months to be mindful. They recommend buying from approved pre- owned vehicle companies or thoroughly inspecting vehicles before purchasing.

The storms in the region last week brought the heaviest rainfall in 75 years, causing severe flooding and leaving thousands of cars damaged. These cars are likely to be put up for sale in the local market.

Abhinav Gupta, CEO of the Gulf region at Cars24, estimated that thousands of cars have been affected, though the degree of impact will be different.

“Sharjah and Ajman are more affected than some parts of Dubai. Lately, a lot of our buyers have come back, either wanting their cars serviced or looking for new cars. We spoke to many partners also who indicate the same figures,” said Gupta.

Gupta estimated that 2025 per cent of submerged cars would likely have serious problems or damages (depending on the scenario).

“Owners will retain those cars that are repairable. They will come later. Most of these cars should return to the market in the next six to 12 months.”

Based on the estimates of ecommerce platforms for preowned vehicles, around 0.5 million pre- owned cars were sold last year, growing at 7 to 10 per cent year- on-year.

According to Gupta, there are three categories of damaged vehicles – first, that are completely submerged and beyond repair because damage cost exceeds the value; second, cars that are repairable but costly; and third, vehicles that have minor damages.

“The first two categories will be tricky because either insurance companies will write them off or end-users will not get insurance and get them repaired or sell them off. Eventually, all these cars will end up either at auctions, some classified website or local dealers in the industrial areas who take them to a cheap workshop which does basic repairs and fixes them cosmetically to make them look shining. That’s where these cars will end up,” Gupta told Khaleej Times in an interview.

He cautioned that these cars would be a risk to those who plan to buy pre- owned vehicles in the open market because these will most likely remain up for sale over the next 6 to 12 months.

“The reliability of these cars will be questionable because if they are repairable, insurance firms will not write them off. Water has seeped into engines, transmission and electrical are affected, and airbags may not function later; the sheer reliability of these cars is definitely questionable. The garages where these cars are going for repair are also not trustworthy. Therefore, it doesn’t make sense to buy these cars for personal use,” he said.

In this scenario, he suggested that buying from unorganised open markets, classified websites or small dealers is a very risky bet.

The Cars24 CEO added that a certain number of these damaged vehicles will be exported to African and Middle Eastern countries as well.

“A majority will end up in the open market and some of them will also be out of the country,” Gupta said, adding that organised pre- owned car players in the market will benefit from this.

Gupta forecast that trusted and organised players would be able to command a premium because there could be a supplydemand gap.

“Definitely, good quality used cars should see some price increase. There is some artificially built-up demand because of the floods and some used car prices should spike in the next six to 12 months,” he said.

He added that UAE motorists who have lost their vehicles will look for a new one, driving additional demand for cars. And cars which were not damaged in the floods will be fewer than before Eid Al Fitr period, so there will be lesser supply, resulting in a gap between supply and demand,” he concluded.

A majority of these cars will end up in the open market and some of them will also be out of the country.” Abhinav Gupta CEO for the Gulf region at Cars24