Usedcar pricesup on high demand
The average buying price of a used car has gone up by 7-8% in the last one year
NEW DELHI: The demand for personal mobility amid constrained budgets which sparked a move towards used cars with the onset of Covid-19, is seeing renewed traction as new car prices go up and waiting periods elongate.
Used car arms of original equipment manufacturers (OEMs) and online marketplaces for such cars have seen a price appreciation of 7-10% in valuations for pre-owned cars in the last couple of years, because of high demand from buyers and customers delaying their decision to replace or upgrade an existing vehicle with a new one, ultimately reducing the number of old cars available in the market.
“The average buying price of a used car has gone up by 7-8% in the last one year,” said Shashank Srivastava, executive director of India’s largest carmaker Maruti
Suzuki. “Many customers who would be saving up to buy a new car or get it financed find that prices have gone up further by the time they have come to the market. For them, a used car may fit their budget better,” he said.
This price appreciation is substantial, but is mostly led by high demand for younger used cars, or vehicles which are 2-5 years old.
The value of cars nearing the 10-year mark was seen to drop sharply because of vehicle scrappage policies in various states, according to which customers are mandated to scrap a gasoline-powered car after 10 years of use, and diesel-run cars after 15 years of them being on the road, Srivastava pointed out.
Customers were preferring to hold on to their cars for a longer period of time now, Srivastava said. The average period of time for which a customer uses a car has gone up from eight years to more than nine years over the last 12 months, he pointed out. Thus, exchange penetration dropped to 18% last financial year from almost 28% pre-Covid. However, Srivastava said, replacement buying is picking up pace once again. Exchange penetration too is going up and was already 19% till February this year.
True Value, Maruti Suzuki’s pre-owned car arm, will end the year nearly 15% higher in terms of sales compared to last year. “We did 0.27 million used car transactions last year, and will cross 0.31 million this year,” Srivastava revealed.
Mahindra First Choice Wheels has also seen significant growth in sales this quarter. “We have been growing 100% yearon-year for a few months. In Q4, the total number of cars sold will be almost equal to the overall volumes we sold in the full previous financial year,” said Ashutosh Pandey, chief executive officer and managing director, Mahindra First Choice Wheels.
“Used cars have always been a supply-constrained space, and the recent spurt in demand has only exacerbated this gap. This has led to a rise in the prices of used cars by 5-15%,” he said. However, tech-enabled digital used car buying and selling platforms are seeing fewer constraints on the supply pipeline as the market consolidates in the hands of organized players, particularly those with a growing digital play.