While the new car market is seeing stunted growth, the used car market has been growing well over the years with several first time buyers opting for used cars.

Diesel Hatchback Shootout
For every new car sold, there is also a used car sold in the Indian market

According to the consultancy and market research firm Frost & Sullivan, used car sales are equal to new car sales in India. While the Indian auto market is struggling to grow in the past two years due to the economic downturn, the used car market has shown positive signs during the same period with the organized used car sector comprising of established companies like Mahindra, Toyota and Maruti Suzuki reporting impressive growth.

As per the research, more and more first-time car buyers are looking towards the used car market in recent times. Backing up the theory, research firm JD Power also stated that first time buyers considering used cars has increased in the country from 4 percent in 2011 to 17 percent in 2014. Experts suggest that the inclination towards used cars has been majorly due to high inflation as well as interest rates. First-time car buyers have been either postponing their purchase or opting for second hand cars instead.

Passenger vehicle sales dropped significantly in 2013, for the first time in 11 years. After stunted growth over the year, the past few months have shown some positive signs, but the overall growth rate is still slow and far from what the industry desires. In addition, more and more young customers are opting to jump segments through the used car market, instead of opting for new entry-level cars at the same price. By the end of the year, Frost & Sullivan expects the sale of both new and used cars to be at 2.5 million units each. In comparison, developed markets come with ratio of 1:3 where 1 represents new passenger vehicle sales and 3 represents used passenger vehicle sales.

Another factor favouring the used car business has been the involvement of car companies in the used car business. Most major automakers have a used car counterpart that offers pre-owned cars certified by original manufacturers and backed by warranty. Maruti’s pre-owned business True Value recorded a growth of 36 percent in the first half of the year, while sales at Mahindra First Choice grew four times faster than new car sales. Toyota’s UTRUST too has been growing at a rate of 20 percent over the past few years.

Shootout - Octavia vs Corolla vs Elantra vs Fluence
The organized used car market has grown at an estimated 15% over the past year

Source – Economic Times