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.”