Apparently, new car market and used vehicles are now a better value proposition after regular price hikes taken by vehicle companies.
While new passenger vehicle sales are not so quick from moving from first gear, clocking only 2.7% increase in financial year 2019, used vehicles are grooming away with four-times that of new car sales, according to the officials dealing with resale of cars.
Organized used vehicle sellers including Mahindra First Choice Wheels, Droom and OLX stated the major driver for this is that used car business is not as dependent on funding as new car market and used vehicles are now a better value proposition after regular price increases taken by auto companies.
“Sales of used passenger vehicles are moving at a 10-12% clip in Q4 and the growth was faster previously at about 15%,” stated Ashutosh Pandey, CEO, Mahindra First Choice Wheel. He explained that there is a cash crunch in the market and new vehicles are becoming more costly. “In used, for the same price you get one category higher vehicle. For Rs 5 lakh ($7,228), instead of an Alto or Santro, consumers are looking for a used Honda City,” stated Pandey.
Pandey described that this demand was coming more from smaller towns where used vehicles are purchased on cash upfront basis so the liquidity crunch in auto financing is less relevant in these sectors. “Loan penetration is still much less in used vehicles,” stated Pandey.
What makes used vehicles a good deal is the cost differential, said Sandeep Aggarwal, founder and CEO of online platform Droom. “On an average, a mint condition used car enjoys 40% arbitrage compared to same model new car,” stated Aggarwal.
