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Old 5th February 2008, 09:39   #1
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Default Nano effect: Used car market crashes by 15-30%

New Delhi/ Mumbai: Call it the “Nano effect” but less than a month after Tata Motors displayed its competitively-priced small car at the Delhi auto show, prices in the 1.3-million used-car market crashed 15 to 30 per cent, if not more.

The Nano, due to be launched this October, will carry an on-road price of about Rs 1.3 lakh (for the base model), which is lower than the price of many used cars in the A segment (which includes the Maruti 800 and Alto, for instance).

“The price of a second-hand Maruti 800 has dropped over 30 per cent since the Nano was unveiled. To give an indication, the price of a 2002 model has dropped from Rs 1.1 lakh in December to Rs 75,000 today,” said Arif Fazulbhoy, director, Fazulbhoy Motors, one of Mumbai’s largest car dealers.

A 2003 Hyundai Santro that was available for Rs 2 lakh before the Nano display, is now on offer with an 18 per cent discount at Rs 1.65 lakh. A 2003 WagonR model from Maruti Suzuki is currently sold at Rs 1.8 lakh, a discount of Rs 33,000 on its used-car price of December. So is the case with Alto, Esteem, Ikon and Palio.

Despite this steep price drop, Fazulbhoy said it is hard to find buyers because many are postponing their purchase decisions till the Nano launch.

“With Nano’s entry the three-year-old Alto has now become affordable to the buyer who was earlier looking only for a Maruti 800 used car,” added Sunil Mittal, vice -president — network and business development — of one of Delhi’s largest used-car dealers, First Choice Wheels (earlier known as Automart India).

Mittal said the price of a three-year-old Alto has dropped from Rs 1.35 lakh to Rs 1.10 lakh since the Nano went on display. The small used-car market accounts for over 70 per cent of all used-car sales within the country. Eighty-five to 90 per cent of all car sales from the Maruti True Value outlets are small cars.

However, despite car manufacturers getting into used cars the unorganised market dominates the country’s used car market. Analysts and dealers predicted that used-car prices will only head further south once the Nano is on the roads. “The Nano will cannibalise used-car sales by exerting more downward price pressure,” said Vaishali Jajoo, auto analyst in Angel Broking, who sees prices falling 10 to 20 per cent more.

Accordingly, used-car dealers are bracing themselves for a squeeze on margins. Admits Ankit Sharma, manager — sales — in Delhi-based Patliputra Automart India: “With the small car contributing 70 per cent of our sales, used-car dealers might have to refocus their business on high-end cars.”

Also, as a Mumbai-based dealer pointed out, “When a Nano buyer is getting a better finance deal with a monthly instalment of Rs 1,100, at a much cheaper interest rate (11 per cent), why would he go for a second-hand car, which carries an interest rate of 17 to 18 per cent?”

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Old 5th February 2008, 09:55   #2
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This is indeed very good news for buyers of second hand cars. Cars like Alto, Santro are overpriced badly in the seconds market. Now atleast the price would be in range.
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Old 5th February 2008, 09:59   #3
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Will the price of OHC Vtec also drop by 30% ?
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Old 5th February 2008, 10:29   #4
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I doubt that. However this is really good news.
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Old 5th February 2008, 10:30   #5
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Thats very good news for used car buyers. Small cars are really overpriced so now its time for good correction. I heard same thing couple of years back that in 2008 used car rates will come down because of many new cars are being launched between 2008 and 2010. Its good benefit to customers for sure!


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Old 5th February 2008, 10:48   #6
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Oh so one good effect of nano over there.
I think you will also get lot of second Auto also in market now! How about owning one ..
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Old 5th February 2008, 11:05   #7
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This is good news for the used car buyers in the small car segment. Hope they will not bring down the prices of mid segment cars also. Otherwise, the people like me will take hit.
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Old 5th February 2008, 20:47   #8
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Well waiting for the OHC prices to drop too...Wow thgis news is awesome.
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Old 5th February 2008, 21:56   #9
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This will be a transient thing for a year after Nano launch. Nano might change the vehicle ownership status perceptions. Owning a new car might not be looked at as a status thing. Which in turn might even turn people towards second hand better cars.

In anycase the used car market in India has not yet matured as much as we would have liked to. Nano might change that.
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Old 7th February 2008, 11:13   #10
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Nano has not affected the used car prices atleast in Kerala. The prices of used small cars are same as before the Nano's showcase.
I would just give a damn about the news for the moment !
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Old 7th February 2008, 11:52   #11
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I think its the right time to sell everything and start searching for a pre-1970 Fiat or willys !! With some decent mods, it can still remain faithful for another 20 years or more and fetch a better resale value when you want to sell it at a later time !
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