The used car market, which has been handsomely outpacing the new car market’s growth for several years now, is in the midst of its own transformation, with the sector now looking at getting formalised. And as an increasing number of car owners replace their used vehicles, the Indian used car market will grow by an average of 15 percent annually in the coming years.
- Used vehicles to see average annual growth of 15 percent in the coming years
- Percentage of financing for used vehicles to grow in three to five years
According to OLX Autos, the used car market is set to touch 7 million units by FY26. That is almost 2.5 million units more than the new passenger vehicle market, which is estimated to grow to 4.5 million units by then. During the recently concluded jury round of the OLX Autocar India Pre-Owned Car Awards 2023, the jury members had some interesting insights on the market. The panel included Amit Kumar, CEO of OLX Group India; Hemal Thakkar, director, Transport, Logistics and Mobility, CRISIL Market Intelligence and Analytics; and Ravi Bhatia, president and director of Jato Dynamics India.
Kumar said given the improving road infrastructure and rising mobility needs, the demand for used vehicles will continue to grow at an average of 15 percent annually in the next few years. Additionally, with cars being seen as a status symbol and it being a liquid asset, the demand for it will continue. Thakkar also felt that higher growth will be seen in the premium used car segment as aspirations rise and as premium vehicle carpark increases.
Financing for used cars
While finance penetration for used vehicles is just at 25 percent versus 75-80 percent in the used car segment, it is rising. Kumar expects the percentage of used cars getting financed to grow to 40 percent in the next three to five years.
However, there are challenges here, namely with respect to the number of eligible customers. Given that a large part of the market remains unorganised, there is a significant cash element involved in the consumer-to-consumer trade. And while even the penetration of financing will grow, the rate of interest to finance used vehicles is still higher and stricter screening of customers may pose some headwinds.
Furthermore, as Bhatia put it, the number of people with enough “CIBIL score to get the credit has shrunk from 28 crore to 19 crore” and that translates to fewer buyers getting their vehicles financed. He also added that “unless financial institutions show some dedication and commitment to grow this market, the used car market will witness slower growth.”
OLX Pre-owned Car Awards 2023
The second edition of the Pre-Owned Car Awards is hosted by OLX Autos in partnership with Autocar India and will be held in December 2022. The idea behind the awards is to provide consumers with relevant information and expert recommendations to help them make well-informed decisions when making a used car purchase. Read more on the awards and the voting process here.
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