[DukeNukem]

New car sales might be on the downturn but the used car market is doing much better, according to a report in the Times of India.

With annual sales of nearly 25 lakh units, the Indian used car market is expected to grow by 10 % this year (compared to 3 % expected growth for new cars). Major used car sellers are aiming at double-digit growth in the market, as more customers prefer to choose organised players over neighbourhood brokers. A sluggish economy, coupled with high interest rates & rising fuel costs have kept new car customers at bay, the majority of who rely on loans for purchases.

We @ Team-BHP.com have always believed that used cars provide a superb value-for-money proposition. Whether out of choice or compulsion, an increasing number of customers are now agreeing with the same.

The best part is that options within the used car market has expanded considerably, due to the sheer number of launches over the last couple of years. It is also important to note that cars today are built far better and have superior reliability compared to cars from the nineties. It is not uncommon for currently sold models to serve dependably for 150,000 - 200,000 kms (and over). The presence of organised players is also increasing, as profit margins on used cars frequently exceed that of new cars.

The most significant disadvantage of purchasing a used car is the high interest rate of loans on pre-owned cars. Bank officials have spoken about softening interest rates on used cars for salaried customers.

In India, one used car is sold for every new car, which means that the market for both is roughly the same size. Some other markets see ratios of 3:1 in favour of used cars. The growth potential is definitely there. Maruti True Value is expecting a 20 % rise in sales this year, after selling 2,31,000 units last year. Meanwhile, Mahindra First Choice is looking at a 35 % growth in 2012, after sales of 34,000 units last year. M&M also plans to add a 100 more outlets to its existing network of 167 dealers across the country.



Related threads:

Buying a New Car vs Used Car

How to buy a *USED* Car in India

[libranof1987]

I have a feeling most of the 2nd car sales are of petrol cars. People must be lapping cars that they could't afford as brand-new which are now available at throwaway prices. Prime examples being the '08 City, Accord etc.

Let's see how well this holds true once the rumoured diesel hike takes place.

[drmohitg]

This is the best time probably to pick up a car in the used car market. The fuel pricing fiasco has ensured that some very popular cars depreciate alarmingly fast. Also with ever increasing models and new cars being launched including refreshed variants, a new car loses a lot of its value in 2-3 years. So no doubt that there sales are increasing and I can see this trend going only north from here.

[mayankjha1806]

You forgot to mention one of the important finds in the report.

The report corroborated that 60% of used car sales happen between individuals and not through these used car dealers, further 28% happen through the friendly neighborhood broker. The organized car market is hardly 11%. This says a lot about trust the customer has on the organized used car dealers.

Anyways here is the link - Used car market growth to more than double this year - The Times of India

[rajeev k]

Many first time car buyers source used cars and now with manufacturer's used car arms like Truevalue and Advantage there are more choices. Even there are pages of used car classifieds.
Likewise when there is an upgrade to a new car, the old car is sold in majority of cases.

[SmartCat]

Isn't this a statistical reality? After a point, there will be more old cars in the market than new cars purchased every year. No wonder developed markets see old Vs new sales in 3:1 ratio.

[DCEite]

Well I bought a new car for the price of a Used car

Exchanged a 2004 WR for a new WR, and the net cost for me was Rs. 2.67 L which included accessories like Remote locking, steering cover, flaps, wheel covers, side moulding, gear lock etc.

[ad3952n]

Reviving the thread after 2 years!

Dear Folks,

In India, as per the latest report from THE HINDU, the used car market is ready to overtake the new car market.

A report on The Hindu states that the used car market in India is expected to grow up to 2.5 times the size of the new car market owing to acceptance of used cars, increasing aspirations and expansions of organized used car sales outlets.

Link: http://indianautosblog.com/2014/08/u...ampaign=buffer

Thanks

[S2!!!]

Used car sales in India have been at par with new car sales since a few years now. The ratio of used cars sold to new cars in India is 1:1 while the ratio in some developed countries is almost 3:1 in favour of used cars, as per an article in ET Auto. Frost and Sullivan - a market research firm, expects sale of both new and used cars in India to be 25 lakh units each in 2014.

High inflation as well as interest rates have resulted in struggling new car sales. Nearly 17% of first time car buyers (vs 4% in 2011) are now opting for used cars over new ones either due to financial constraints, economic uncertainties or the sheer aspirational value of owning a premium (pre-owned) vehicle over a new car belonging to a lower segment.

Pre-owned cars certified by OEMs and backed by warranty have now begun catching the fancy of used car buyers. Maruti's True Value (used car division) recorded a 36% growth in the first half of 2014; Toyota's UTRUST grew by 20% over the past few years. The story at Mahindra is no different - Mahindra First Choice grew by 20% year-over-year; in comparison, its new car market grew by ~5% in this fiscal.

Renault among other manufacturers is also planning to enter this lucrative organised used car industry after seeing its high growth potential. Hyundai, Honda, BMW, Audi and many other manufacturers today have already begun their used car divisions. The used car industry which has grown by 15%. In 2012, the organised used car industry captured only 11%, while C2C (consumer to consumer) captured 60% of the total used car market and the remaining 28% was enjoyed by friendly neighborhood brokers.

Link to news article

[ramzsys]

This also means we have to be prepared to shell out more at the service centers through higher margins on spare part prices and service costs.

[allien936]

Many of the company owned Display cars are also sold at a reasonable price. Those cars wouldn't have run more than 20,000 kms. Also, what is available for display in the showrooms are the top end versions. Hence one gets a good deal, with all the possible options like ABS, airbags, alloy wheels etc. Before choosing my car (a used Skoda Fabia 1.4 PD Tdi Elegance), i had gone to VW showroom as i had seen their advertisement in a local news paper for the sell of their showroom display cars. A diesel Polo Highline was available for 5.8 lacs But i was not willing to shellout more than 4 lacs (had already extended the budget from 3 to 4 lacs). But got a really good deal for the Fabia. The rate at which the price of these cars goes down in the market, the reliability and quality does not go down at the same pace. Even BMW now has their own used car section. A 1 series BMW 118d sportsline is currently available for 25lacs, which has just run for 20,000 kms. Then why buy a new one for around 40 lacs.? Basically one gets all the techno bits and luxuries that are in the top end version of any car at the price of a basic version of the same new car.

Hence i think that the used car scenario is definitely changing the scene of indian car market.

[Agarwaka]

Not to split hairs, but I read an article / report somewhere that pegged the current used:new car sales ratio at 1.3:1 and has estimated it to reach 1.7:1 in another 4-5 years. The ratio in developed countries ranges from 2.7-3:1, and if IIRC, some European countries have a higher ratio than the US.

Wondering if this (the ratio of 2.7-3:1) is a sort of tipping point that signals the plateauing of growth of new car sales (like it's happened in Germany) and gives rise to, or, is evidenced by the emergence of new car sharing business models like Uber, etc.

[gomzi]

Originally Posted by Agarwaka

Not to split hairs, but I read an article / report somewhere that pegged the current used:new car sales ratio at 1.3:1 and has estimated it to reach 1.7:1 in another 4-5 years. The ratio in developed countries ranges from 2.7-3:1, and if IIRC, some European countries have a higher ratio than the US.

Wondering if this (the ratio of 2.7-3:1) is a sort of tipping point that signals the plateauing of growth of new car sales (like it's happened in Germany) and gives rise to, or, is evidenced by the emergence of new car sharing business models like Uber, etc.

That's exactly what i'm thinking of as well, with austerity measures on home expenses too. I think reading encouraging articles about used car buys online is also getting people to think of it as an option.

Its a good trend that's emerging as it will keep the manufacturers honest in terms of new car sticker price and also lead to better usage of cars and all the resources that go into producing a car.

With the after-market customizations market also starting to provide many options, there's very few features apart from integral ones such as ABS/Airbags that cannot be retrofit into a used car.

[ramzsys]

^
Developed countries have stabilized population growth. Is it the case here?

[Rajeevraj]

Came across this nice article by Management Punditz on the Used Car Industry in India. Some good charts and numbers.

Indian Used Car Industry

Key extracts:

Indian Used Car Market has seen a sudden surge in sales, customer acceptance and business interests in the past half-decade. While the New Car Industry is reeling to post single digit growth, Used Car Market is consistently delivering 20-25% YoY growth. As of date, the Used Car sales have overtaken the new car sales in the sub-continent. By 2020, for every new car sold, 2 used cars would be sold in India! The trend looks like this:

Out of the 25 Lakhs New Cars sold - 7.5 lakh cars (30%) were purchased by those customers who had exchanged their old cars and bought a new car! And a hefty 20% (5 Lakh) of the customers traded their old cars in the organized retail outlets (say Maruti True Value / CarTrade / Quickr / Carnation etc) before their new car purchase

With the growth of Used car industry being double then the New car industry, we still believe that it is ignored and yet lacks innovation. With more organized players foraying the segment, we expect investments to happen significantly in infrastructure and customer interaction platforms. These organized players need to lead with innovation and enhance customer trust!

• Personally I am a big fan of used car purchases. My first 3 cars were pre- owned and I could not have afforded the new versions of the same.
  
• Considering the huge amount of launches in the last few 4-5 years upgrade cycles shrinking, the used car market as mentioned above is definitely going to explode.
  
• Many people still have a block against buying used, but as the sector continues to evolve into a more matured reliable model, customer confidence in buying used is going to increase.
  
• The fact that new car prices are continuously on the up tick and there is a shift in segment level limits is also making people look towards the used car route.
  
• This excellent thread by GTO on the Beauty of Lateral upgrades is a very good read.