Used luxury car sales boom despite auto market gloom

Jan 19 2014, 00:11 IST
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In the past few years, most luxury car makers have also entered the used car market In the past few years, most luxury car makers have also entered the used car market
SummaryGrowth in sales maximum for used luxury cars, at 60% in 2013

At a time when the mass car segment is facing one of its worst times ever, sales of used luxury cars have catapulted over 60% to about 30,000 units in 2013. What’s making the second-hand Mercs, Audis and BMWs race ahead is actually simple logic. The aspirations are high, but pockets are not so deep. So buyers settle for second best, which is used luxury cars. What swings the decision in favour of these cars is the fact that despite being used, they are usually in good condition,with very few kilometres on the milometer. The quality, of course, is assured. So instead of spending the same amount on a new car, buyers are opting to upgrade their choices with luxury cars. High interest rates and rising prices of new cars are other nudging factors.

As per online automotive marketplace Gaadi.com, which maintains the country’s largest used car inventory, luxury car seller listings in 2013 almost tripled to 4,392, while buyer queries were up 72% at 23,133.

“Luxury cars are usually better built with better quality material than mass segment cars. What that means is that they last longer and have fewer problems. However, financing for used cars is still a challenge,” says Umang Kumar, CEO, Gaadi.com. The website lists the inventory of about 1,100 used car dealers across the country, including some Maruti True-Value outlets and Mahindra First Choice.

Luxury used cars are a great bargain because they are more new than other vehicles — traditionally they enter the used car market just about three years after purchase, as compared to an over five-year average for mass segment models. Moreover, the price drop is also sharper — a three-year-old used luxury car like a BMW 3-Series usually sees its price fall by half, while mass models only record about a 30% price drop in the same period.

The biggest boost to the demand for used luxury cars is partly due to the fact that in the past five years, annual sales of new luxury vehicles have jumped by as much as 60%. In 2013, the sale of new luxury cars was up about 20% at 34,000 units. As first owners sell these cars, the pool of used cars gets bigger.

Though official data is not available, industry experts estimate India’s total used car market at a little over three million units, with a 25% annual growth. This is almost the same size as India’s new car market of 2.7 million units. Interestingly, while the country’s used car market sharply lags behind developed economies, where the used car market is three times the size of the primary market, the size of the used luxury car market is the same as the new luxury car market, say sources.

In the past few years, most luxury car makers have also entered the used car market. “Mercedes-Benz India witnessed a strong demand for its pre-owned car business, Proven Exclusivity, in 2013. The company witnessed more than 25% growth in 2013 in this segment. More than 1,200 units were sold,” says a company statement.

Puneet Gupta, principal analyst at IHS Automotive, adds, “A lot of car manufacturers are betting on the used car market; the margins are higher. Many consumers look for premium cars, and used cars give them an opportunity to upgrade to luxury even as they spend lesser.”

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