[wheelspinner]

Hi BHPians,

After a long hiatus, I'm back to Team-BHP to do some research. So, I'm finally trying to buy my first car. People have advised me against buying a new one as it is better to learn driving in a used car (I did learn driving when I got my license but have forgotten because I never owned a car!).

However, after endlessly scrolling through classifieds sections in Olx, and other marketplaces I'm very disappointed. For reference, when I joined the forum back in 2019, used cars were sold at attractive prices. For example, in 2019, a 5 month old Swift ZXI+ was priced at 5.4L at True Value, at a 2L discount with the dealer giving me further discounts. In stark contrast, I'm unable to find a 2019 ZXI+ at the above price in good condition after 4 years! The situation is so bad that even 10 year old well maintained Swifts are demanding 3L! Why are the prices so absurd?

I personally feel that this market is unsustainable. My guess is, this is primarily because of easier access to financing, better salaries, and more black money (I've heard that most used car deals are done partially in cash).

Eventually the supply will outpace the demand as interest rates increase, and financing becomes less feasible. This would cause a bubble burst. Is that scenario likely and are you willing to wait till then to make a purchase?

What do you think?

• This is not a bubble, it will be an ongoing trend like the real estate market
• Eventually the bubble will burst, and prices will go back to normal as dealers will have lots of leftover inventories

Note: Mods please remove the post if it is unrelated to this topic or, duplicate.

Cheers

[anoopvk268]

Hello

I am not sure where you are from, but the used car prices are absurd in Bangalore. As you said it is very similar to the real estate scenario. People are ready to pay astronomical rents, so the owners are asking even higher.
I recently sold my 2017 model Zeta Baleno ran 50k KM for just 2 lakhs less than what i paid for 6 years ago!.

[androdev]

1. 10 years back budget cars were not exciting or choice was very limited. Income levels were also not so great across the board.

2. Income levels started going up (marginally, esp in metros) but around this time Uber and Ola started offering great services discouraging private car purchases.

3. COVID happened and people without personal cars experienced great inconvenience and insecurity - I am sure many prioritised buying a car above all else.

4. Ola and Uber, etc have become horrible, most certainly not a sensible option any more for frequent use.

5. All the premium and fancy features are being offered in budget/mass market cars - customers never had it so good when it comes to being excited by the features and options.

Obviously, all this applies to a small % of India's vast population, so not a reflection of the country overall.

Something similar can be said about real estate. The same demographic as above is seeing a lot of value in buying a small apartment in large gated apartment projects - which is where most of the housing action is taking place.

I think the demand from this demographic will only intensify. Not a reflection of the country overall, but a small section of the country that is likely to benefit from few things going well for Indian economy.

[2000rpm]

Used car market is gonna sustain at current prices, because the alternatives are very expensive.

A decent new car today is atleast 9 to 10 lakhs on-road.

The government has not done any favours to the car industry with all the taxes.

[SmartCat]

Most of the time, the seller is still getting a bad deal. Only the buyer is paying the higher price. The difference is being swallowed by the used car dealer. Now this is not exactly unfair nor it is profit gouging - the used car dealer has to maintain inventory of cars, which locks up capital. Further, he has other overheads like showroom expenses & sales/evaluators salaries.

I think there has been a big drop in direct transactions between sellers and buyers. That's because both buyers and sellers are preferring to take the dealer route.

From seller point of view:

- When you put up an ad in classifieds, you are bombarded with low-ball offers from used car dealers
- You get home visits from intermediaries (who "look" like genuine buyers) who waste your time taking test drives, after which another low-ball offer is made. These guys then sell it to dealers at a higher price for a quick Rs. 5k profit.
- Dealing with genuine buyers too needs time, patience & negotiation skills.
- After the deal is done, the seller has to follow up to ensure that registration transfer has been made.

From buyer of point of view:

- Most of the ads in classifieds are by dealers
- Genuine sellers inflate the asking price (because they know people will quote a lower price)
- It is a pain to travel all the way to other end of the city to see the car. On a weekend, you can see 2 or 3 cars at best. But if you approach a dealer, you have a wider variety of cars to choose from. This is super convenient.
- Buyer has to visit RTO to get registration work done, which might need multiple visits.
- Easy access to finance when you go to used car dealers.

[audioholic]

So the basic logic is new car prices going through the roof. And this resale value story is valid only for popular cars. We got our Celerio in 2016 for roughly 6.25L. I'm getting easily 4.25L without bargain a whole seven years and 75k kms later and the vehicle being battered all over.

That's only 2L of depreciation translating to 28k per year or roughly 2400 per month. Now where are those who favor cabs to owning a car?

For now I dont think it's a bubble waiting to burst, until this era of cars go bust and the price hikes stop. Until then, its a lottery for current car owners especially if you have a Maruti, Hyundai and the like. Multiple factors playing in their favour with a good demand from tier 2 and below areas as well.

[anoopvk268]

Originally Posted by audioholic

So the basic logic is new car prices going through the roof. And this resale value story is valid only for popular cars. We got our Celerio in 2016 for roughly 6.25L. I'm getting easily 4.25L without bargain a whole seven years and 75k kms later and the vehicle being battered all over.

That's only 2L of depreciation translating to 28k per year or roughly 2400 per month. Now where are those who favor cabs to owning a car?

For now I dont think it's a bubble waiting to burst, until this era of cars go bust and the price hikes stop. Until then, its a lottery for current car owners especially if you have a Maruti, Hyundai and the like. Multiple factors playing in their favour with a good demand from tier 2 and below areas as well.

True this. Most of the Maruthi cars may be except Ignis and S cross have exceptional resale value. Same with Honda City.

The VW cars with DQ 200 have the worst depreciation hit. And now Ford models are also going down in value very quick. Have seen many good condition Ecosport stuck at dealers .

[ram.iyer95]

I might be in the market for a small car next year, and have been window shopping on Spinny and Cars24 for sometime now. The prices quoted on these portals are just crazy, especially for the popular Maruti and Hyundai cars like the Baleno, Swift, Wagon-R, i10/i20 to name a few. The quote for a 10 year old Wagon-R is around 3.5-3.7 lakhs, which I just cannot digest. And then there are some 10-11 year old Honda Brios being sold for close to 3.5 lakhs; it has been almost 5 years since this car was discontinued! I am interested in getting a 6-7 year old Honda Jazz or Amaze as these have better safety ratings, but even for these which weren't all that hot-selling, the prices seem unrealistic.

There are also quite a few listings of 3-4 year old Ford Figo/Freestyle which seem like decent deals, however, the risk is a bit too much.

All this when we have some posts in our forum itself where people have found out that the so-called '100+ checks' and 'certification' that these aggregators do on the cars is more or less just eyewash. Please correct me if I am wrong here.

So much so, that I am now starting to feel that it is better to abandon the search for a used car and rather buy one new, maybe something like a Tiago.

Also, used car loans have a much higher interest rate than new car loans. Hence, I personally feel that a used car may make more sense when one can put down a substantial amount of the price as down payment, or better, buy outright. Else it is probably better to buy new and enjoy the peace of mind that a new car with factory warranty offers.

Just my 2 cents.

[GTO]

New car prices are set by the manufacturer. It can be a hit or miss.

However, used car prices are set by the market. Irrespective of what the seller wants, it is the market that will dictate what is paid. Sellers adjust their prices accordingly, even tweaking the price on a daily basis (which isn't possible with new car launches). Right now, it's clearly a case of very strong demand, relative to the supply. That's the sole reason.

You got to pay through your nose to buy a car today, whether new or used.

[robincsamuel]

Originally Posted by ram.iyer95

All this when we have some posts in our forum itself where people have found out that the so-called '100+ checks' and 'certification' that these aggregators do on the cars is more or less just eyewash. Please correct me if I am wrong here.

This is absolutely true. My friend purchased a car from Cars24 and later figured the car had a major accident. The repairs were done at Hyundai ASS and is there in the service history.

However, after sharing relevant proof, they took the car back and issued a full refund.

[wheelspinner]

Originally Posted by robincsamuel

This is absolutely true. My friend purchased a car from Cars24 and later figured the car had a major accident. The repairs were done at Hyundai ASS and is there in the service history.

However, after sharing relevant proof, they took the car back and issued a full refund.

The resolution offered is commendable on the part of Cars24. On the other hand, if you had bought from a local dealer you had to bid adieu to your hard earned money

[NazgulLOTR]

There is an over supply of money per se amongst the affluent (let's called them upper middle class, probably earning close to a Crore a year as a household) With this over supply of money, very high prices for all new cars and an indian mentality to just save a few rupees, there will always be a massive demand for second hand cars in India. And with the organized players coming in, the "cartelization" of the second hand market is pretty obvious next step. I am in the market for a 530D or a X4 and i am finding it quite difficult to digest cars being sold at 20% lower than their original invoice even after 4-5 years. The information assymetry is massive in this industry.

On the positive side, buyers have the cash and cash is KING. Be patient, keep looking and you will find the car of your dreams at the price you wanted.

[hothatchaway]

This phenomenon is not limited to India alone with used car prices soaring worldwide, including places where the passenger car market is bigger and mature, in the US for example. I suppose one of the contributory factors would be cheap money supply, which has been a defining trend post pandemic.

Sample this, I saw a 2002 Honda Civic (5 speed auto) posted on Autotrader US by the owner with a list price of USD 9K. A much recent post 2010 Civic AT in India can be picked up for around 2.5 - 3.5l. That is a much better deal even with the price moderated for purchasing power parity. I surf auto classified pages from all over and prices of used examples of current models here in India are at par or even cheaper than Europe or even the states. This is not considering insurance which when added along with annual fitness inspections etc are anyways more expensive elsewhere. Certain places in India, like Bangalore, are catching up fast though!

I sometimes see lux models listed at a bargain on the western classifieds, but these are usually 15 - 20 years old with manual options. I imagine insuring them and keeping them roadworthy must be more expensive than what it is in India. Everything comes at a price, even discounts!

I doubt used car prices in India are going to come down any soon, especially with startups like Spinny around. The good news is that they usually deal in 'popular' models, so you still have an opportunity with the market duds, provided you find a well kept example and know a thing or two about them.

[wheelspinner]

Originally Posted by NazgulLOTR

On the positive side, buyers have the cash and cash is KING. Be patient, keep looking and you will find the car of your dreams at the price you wanted.

Don't you feel that if the economy keeps getting stronger, eventually people will have deeper pockets, and the prices will rise even further. The government is relentless with the tax, and automobile manufacturers keep pumping the prices up each year. I am really feeling the fear of missing out

Last week, I was recently getting a good deal on Olx. Even before I managed to reach for inspection, the car got sold out

Originally Posted by hothatchaway

I doubt used car prices in India are going to come down any soon, especially with startups like Spinny around. The good news is that they usually deal in 'popular' models, so you still have an opportunity with the market duds, provided you find a well kept example and know a thing or two about them.

I have a hunch that one of the reasons behind this used car bull market are VC funded players like Cars24 and Spinny (Spinny raised $513 million if I recall correctly). They have millions of dollars in funding which they are injecting into the used car market by investing into the acquisition and brokerage (dealer auctions) of used car. You can get instant cash by selling to them even if you are doing a distress sale. The prices offered by Spinny and Cars24 are so competitive sometimes even higher than what private parties are offering. Almost as if they are manipulating the prices.

The other side of the story is they sometimes have to sell at a loss, because the initial cost of acquisition from sellers is so high.

Maybe, once they run out of funding or, have huge stocks left without any takers. The market might see a drop.

[aaggoswami]

Originally Posted by wheelspinner

What do you think?

• This is not a bubble, it will be an ongoing trend like the real estate market
• Eventually the bubble will burst, and prices will go back to normal as dealers will have lots of leftover inventories

The bubble is going to get bigger. New car prices are absolutely eye watering. This has pushed up the prices in used car market. New car prices will never come down, and to an extent this is logical too as the inflation and/or rising input costs will make the cars more expensive. Add to that the fact : Businesses are set up to earn profit. No car manufacturer will reduce prices even if the input costs go down. User car market will sustain at current levels and even used car prices will increase.

What we are not able to get is actual value for money deal. Either buy bells and whistles or get very basic trim. Safety in case of cars under Rs. 10 lakh is not worth discussing except for a couple of manufacturers. Thanks to high fuel cost, people will certainly prioritize efficiency as a factor, which is market driven and hence manufacturers will continue to offer something that is not really a good deal. A 7-8 lakh rupee Swift or Nios are not having good safety rating, that is tough to digest. It all happened after Covid where the need for having a car was felt by many.