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Pre-owned Cars Are Now The In-Thing

The pre-owned car market has come of age. It contributes as much as new models towards the overall growth in the Indian car market of car sales. A domain of service stations till very recently, pre-owned cars have now become lucrative enough to attract movers and shakers of the automotive industry.

The Indian buyer has shed the emotional inhibition of buying a second hand car in favour of practicality and economic consideration. Now, people strutting in their old cars can easily be spotted. These cars might not be as dazzling as the new ones, yet they are no inferior when it comes to performance. They are actually better in some respect. Their parts must have been perfectly synchronized by the time you buy them. The only aspect to watch out for is its age. It should not be so old as to dodder while on the move.

In 2007, more pre-owned cars changed hands than new ones. In the first three quarters of 2007, Maruti alone sold 65,000 such cars, while Honda sold 2,769 used cars. For Maruti, it is twice the number compared to 2006. The people in the know estimate the market to grow at 30 percent this year. It is expected to double in the next 5 years as the two-wheeler owners are increasingly opting for a four-wheeler.

Although 80 per cent of the market is run by the unorganized dealers, it is poised for a sea-change in quality services. Many big car companies like Maruti, Hyundai, Ford, Mahindra, and Honda have decided to give the dealers a good run for their money. Tata Motors and Sundaram Motors have also been planning a plunge. These companies themselves will take care of the condition of the car and do necessary repairs or make necessary changes before selling the car to a customer. Therefore, these will have a higher cost, compared to untested used cars, as they will come with a warranty and a certification of their quality.

Maruti operates through TrueValue, while Hyundai, Ford, Mahindra, and Honda operate through Advantage, Assured, Automart India, and Auto Terrace agencies respectively. Maruti and Automart are providing customers with the facilities that were available only on new cars earlier. These services include proper documentation with additional warranty and free-servicing. Rajiv Dube, the Vice President of Tata’s automotive division, has already said that they had adequate portfolio ready for the pre-owned car venture. It is only a matter of time before Tata chooses to enter the pre-owned car market.

The most important factor propelling the growth of this sector is its low price. A used car in good working condition can bought at a 40 to 70 percent cheaper price. The Indian customer has realized that the taste of the pudding is in eating it. The mature Indian wants a vehicle to realize its individuality apart from the comfort and luxury. The look of the car takes a backseat.

Another factor that contributes immensely towards the growth of the pre-owned car market is the dearth of quality manpower to manage the unprecedented growth of the Indian economy. This causes attrition among the talented and capable ones, particularly in the IT and telecom sectors. The professionals change the jobs only to negotiate better terms and conditions with the new employer. Often, the agreement includes a new car. The redundant old car finds itself in the second hand car market.

Easy availability of loans for pre-owned cars forms another reason that this sector of the market is growing so rapidly. Not only the loans but also insurance is available and easy to get. The down payment and the loan installments have been keyed to the needs of the buyers. According to a study, the second-hand market grows only if the life of a used product increases or if the transaction cost of the product decreases.

The third largest car market, China, is also witnessing the same phenomenon. The queer blend of conflicting economies of capitalism and socialism, China is also playing its part in propelling the growth of the automotive industry. Here also, the pre-owned car market is growing at a rate of 25 percent. The rally in pre-owned sales is forecast to continue to grow in the near future in China as its vast populace still does not own any means of transportation.

In markets such as the US and France, the used car segment is as much as 2.5 times larger than the new car one, said a recent report by consultancy firm, Capgemini. India may outshoot this record in the years to come. After all, we do have the second largest population!