As interest rates climb uphill, the used car market is gearing up for a pleasure drive. Industry experts say the entry-level car buyers, who have a light purse, would now head for the used car market in a big way, with high loan rates and fuel prices pinching them hard.
?High fuel prices and interest rates that are slated to go up again from July 1 will further reduce the affordability of new cars, at least for the middle-income people who have a limited budget. This will result in more people going in for second-hand cars,? says Vinay Sanghi, CEO, FirstChoice Wheels, which is a M&M-led used car business utility.
Agrees Arvind Saxena, senior vice-president, Hyundai Motor India Ltd: ?The high interest rates are expected to boost the sales of used cars as lot of transactions, at least at the entry-level cars, happen in cash and the amount transacted is low. This is contrary to the purchase of new cars under 80% finance.?
Industry estimates put the used car market in India at 1.5 million units, almost on a par with the new car industry. However, the second-hand market is expected to grow by 12-15% in next five years to touch a robust 2.5 million units, clocking a a turnover of Rs 50,000 crore.
?Multiple model launches by all manufacturers has given ample options for people to experiment with new cars. As a result, the average life-cycle of ownership of a car has come down from five-to-six years earlier to three-to-four years now. This is further fuelling the growth in the used car industry,? says Sanghi.
?Around 70 million two-wheeler users in India are expected to migrate to cars. But with prices of new cars going up every now and then, used cars are emerging as their first priority,? adds an analyst.