 The Used-Car Market Scene
After being in the market to sell a coupe of my cars, I have learnt a few things. The pre-owned cars are much cheaper than we think they are. Most of our perception about the rates of second hand cars are based on the various ads we see in the newspapers. But these rates are ‘what the seller wants’ and not ‘what the seller ultimately gets’, which is in most of the cases at least 20% less than the former.
I have always been a believer of used cars (from a terrific VFM point of view) and this only strengthens the case.Cars depreciate to 50% of their value in 3 years, unless it is a Maruti, Honda or a Toyota, in which case it will take 4 years.
One reason why second hand cars go cheap, is the seller is always in a hurry to sell. People want to sell their old car so that they can use it as a down payment for a new car. And they are not willing to wait, once they take a decision to buy a new car. And car dealers (esp used car dealers) exploit this. They are willing to give a demand draft the next day for your car (and you are so busy in the office you will think where will I have the time to sell it off, even if I am getting 15-20k less, it’s ok). These dealers make big bucks, their margins ranging from 15% to 40% (for low-value cars ex. Buy at 50k and sell at 70k)
I can understand that people are apprehensive of buying used cars. We all take good care of our cars. But why do we feel that the person trying to sell his car, has not taken good care? I can understand that once you decide to sell your car, and then if it develops a problem you tend to do a cheaper ‘quick fix’ instead of a better long term solution. But that is expected. I would advise anyone buying a used car for 2.5L (3 year old car) to keep aside 30K for maintenance in the first year. But that is still a lot cheaper than paying 5 L for a new car.
Imagine how the used car market would look in 5 years time. You can get a range of Corollas and Octavias from 3L onwards. Imagine what will happen to the lesser mortal cars.
M |