Why SMEs are opting for downsizing vehicles and renting cars amidst a fuel price hike
Mita Srinivasan
10x Industry

Why SMEs are opting for downsizing vehicles and renting cars amidst a fuel price hike

With the increasing fuel prices, businesses are now shifting habits from buying cars to renting cars. This, according to Soham Shah, CEO and Founder of Selfdrive.ae in this special piece for SME10x, will not only help stabilise inflation, but also lead to a steady growth in the economy. Given that most car rental companies offer subscriptions at great prices, free insurance and maintenance, this is just a perfect solution for SMEs looking to scale their growth and not focus on rising costs.

For a small-business owner it is a sense of pride to drive a brand-new car. But it is also a known fact that when they drive a brand-new car off the car dealer forecourt, it loses value. Studies suggest that a new car drops in value anything between 15-20 per cent when it hits the road. With fuel prices soaring high and given that small businesses have jumped through all the hoops of setting up the business, wouldn’t it make sense to rent a car than purchase it?

SMEs in the UAE are now shifting buying patterns with the current fuel hike. Companies considering to purchase the vehicle in the past are now opting for alternate options like renting/ leasing vehicles, there is a considerable shift from a full SUV or premium sedans to compact SUVs and Economy cars to save costs.

Leasing vehicles by the B2B segment and individual customers are growing and form almost 60 percent of the overall Car rental / leasing segments. Renting or leasing can be a more cost-effective alternative to buying outright, especially when an entrepreneur is starting up during an inflation.

Here are some quick benefits SMEs can avail while renting a car during an inflation.

Low operational Costs: One of the most noteworthy benefits of car rental is predicting the operational costs associated with a car. This allows the small businesses for easier budgeting and financial planning, ultimately simplifying their bookkeeping and strategy. This also allows to manage the initial investments costs under check.

All new vehicle purchases involve initial down payments of 20% of the value of the asset, finance costs, insurance, registration maintenance, replacement vehicle in case of service, accident or repair, depreciation costs, registration costs etc., whereas if you rent or lease a vehicle all these expenses are taken care of the rental company and you just pay a fixed amount per month. Thus, car rentals are recommended for companies that prioritize ready-made solutions and ease of use. Rented car can be a valuable tool to keep the business mobile, enabling staff to meet customers, and reduce any variable costs that are associated with vehicle purchase.

Convenience: Small businesses can lease a car for as long as they need. Also, businesses can choose between small and big cars at any point of time, based on their needs.

Easy Accessibility: Technology is grappling all sectors of work and automotive industry has joined the bandwagon too. Cars can be rented / leased or reserved securely in real-time from anywhere in the world 24/7 and delivered to your door step or collected from a convenient location.

Less paperwork: Another critical advantage of a car rental includes the convenience it brings. Instead of dealing with all the responsibilities associated with car-owning, all the user has to do is choose the best suitable vehicle digitally at the budget you have and focus on important aspects of business.

Flexibility: If a small business that operates on a seasonal basis, car rental is the best option as there is no need to pay for a car all year round. By renting a car, they can decide how long they want to rent the vehicle for, be it a day, week, a month, a season, or a year!

Aside from optimizing the business costs and increased convenience and safety, car rental for small business brings much more flexibility and comfort.

About the author

Soham Shah is the CEO of Selfdrive.ae, a dealer authorized car subscription platform in the UAE. In 2017, Soham started his entrepreneurial journey with literally a single desk, building his empire step-by-step. A major player in the automotive business, Soham has continued to raise goodwill for his company with new and unique offerings. His forward thinking-approach and far-sighted vision has led Selfdrive.ae to be the first company in the region to have leasing option for individuals, which was once only offered to big corporates and multinationals.