Buying a used car? These are the benefits you can enjoy

Today the consumers are smart, they know exactly what they want, the brand, model, features and are open to the idea of buying a pre-owned car as it comes at a better price point and offers the variety.

By: | Updated: January 30, 2018 5:36 PM

Buying a car is an aspirational purchase for mainstream consumers in India and the first purchase always has a high emotional attachment in one’s life. What we have seen is that preferences of car buyers in India have evolved in the recent past. Today the consumers are smart, they know exactly what they want, the brand, model, features and are open to the idea of buying a pre-owned car as it comes at a better price point and offers the variety.The fact is that usually a car’s value diminishes by ~20%-25% in the first year itself, makes buying a pre-owned car a better value for money. Further, there is also a growing societal acceptance of people buying a used car nowadays. This mindset change has transformed the market of pre-owned automobiles in India.

From an industry standpoint, a trajectory for pre-owned car sales in India looks much more promising than new car sales. As per reports, currently the sales ratio for new cars vs used cars are at 1:1.2, it is expected to grow to 1:3 which is the trend seen in other developed markets such as US and Europe. In this progression, we see certain macro trends, which will fuel the adoption of pre-owned automobiles in India.

Rising Consumer Aspirations

First-time Indian car buyers are getting younger and more aspirational. Most of the buyers on our platform are young millennials in the age group of 20-34, who are looking for their first purchase or planning to upgrade to a better vehicle. Some interesting factors driving the demand for the pre-owned vehicle are, shorter ownership cycle, which has reduced from average 7 years to 4 years for a new car and expected to reduce further to 3 years by 2020.This is helping grow the available pool in the used car market. Secondly, better features and quality of cars makes them reliable for longer usage. Thirdly, improved infrastructure in cities leading to less wear and tear of vehicle parts. On our platform, we have seen a huge interest for pre-owned cars. Auto category is the largest category by user traffic on OLX, generating 45% of the traffic, resulting in 1.6 billion page-views, per month. In 2016-17, as per our data 200,000 cars sold per month on OLX, of which 65% were hatchbacks, 20% were sedans and 15% from the luxury and SUV segment. Interestingly, we saw demand for luxury and SUV segment growing at a higher rate than other models. A trend we predict will take up in 2018.

Online Driving the Sales

Advances in the online classifieds space in the last couple of years have influenced the buying and selling patterns of pre-owned vehicles in India, resulting in changing the decision-making pattern of consumers. Online classifieds have simplified the discovery process for buyers and sellers. Just as e-commerce has enabled users to shop within the comfort of their homes. On an average three out of every four interested car buyers, go online to research before making a purchase. As per reports, nearly 70% of Indian automobile sales will be digitally influenced by 2020.
In pre-owned automobiles, we are seeing a similar pattern where the decision made online before the offline purchase. Consumers today spend considerable time researching online about their car purchases; they are very knowledgeable and are willing to look beyond traditional routes. Today, user can easily browse for cars/ two-wheelers available for sale near their locality and connect with multiple sellers before making a visit. In fact, we
registered 72% of the overall sales of pre-owned cars in 2016-17, implying the benefit of online medium.

Non-Metros to Boost the Adoption

Non-Metro is where the majority of unorganised trade takes place in India. Though the market is huge, industry estimated only 12 percent of the pie with the organised players. The tier 2 & 3 towns is in itself home to two-third of our population. Affordability is the biggest factor that boosts adoption of pre-owned automobiles in these markets. People in a Non-Metro market are more cognizant of their interests and rights, and want to make informed purchases and decisions that are independent of intermediaries and cost-effective. The good thing about such markets is that there is still more openness towards people-to-people transactions as there is greater thrust on inter-personal relations. This has helped OLX gain traction in Tier 2 &3 cities. On an average, we receive 45% listing
for cars from Non-Metros. The growth in listings from non-metros is higher than growth from metros. One will find all forms of vehicles listed from smaller towns, be it SUVs to commercial Tractors. In fact, Tier 2 & 3 cities has a huge demand for tractors for farming, there are more than 3,000 tractors listed on OLX at any given day by sellers.

New Regulations to Be Fruitful In Long Run

GST or Goods and Services Tax came as a good decision for the Indian automotive industry. A number of segments witnessed a considerable drop in their ex-showroom price, which includes the requisite tax. This drop further will reflect in the value of pre-owned automobiles, as new car prices start falling post-GST, expect the same for a second-hand vehicle after a couple of months. Dealers went through a bumpy ride in the initial months of GST as the tax rates were aligned to a standard 28%. However, the market revived back in the last two months around the festive time with a surge in user demand. We expect the market to stabilise in 2018, as a higher quantum of pre-owned automobiles enters the online marketplace to fulfil the rising demand of end users.

Author: Sunny Kataria is a Director, Auto Category, OLX India

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.

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