Deloitte Report: Driving Through the Urban Used-Car Market

Branded Dealerships Dominate the Urban Used-Car Market: Deloitte India Survey 

  • The used-car market is witnessing a shift towards the formal channel
  • The majority of customers buy the used-car for personal use. More number of customers from East buy the used-car for both personal & commercial use
  • There are a number of repeat buyers of used-cars. Some even buy used cars after they have bought a new car

February 2, 2016, New Delhi: Deloitte India today released the report, Driving Through the Urban Used-Car Market based on the findings of its survey, which was conducted to gauge the pulse of the used-car market in India. The used-car business has been one bright spot in a slow growing automotive industry in the last few years. The rush to buy diesel cars a few years ago with the prices of petrol being pegged to the open markets and then, the sales going down on account of the inability of the customers to buy new cars led to a visible growth in the used-car volumes. This growth supported by the investments by the manufacturers in the dealer network, branding and reliability of processes made it possible for the customers to consider used cars as a viable option.

With the used-car market estimated at the same size as the new-car market currently, the survey was conducted to provide perspectives on customer profile, buying process, decision factors, norms and benchmarks related to the trade.

Commenting on the survey, Kumar Kandaswami, Partner, Deloitte India, said, “With formal networks growing, it is increasingly becoming cool to buy used cars. Among the urban buyers, there is a clear preference for branded players who enjoy a large share of the market. This is seen across the regions, suggesting the coming of age of this business”

The survey was concluded in 16 cities including Ahmedabad, Ahmednagar, Bangalore, Bhubaneswar, Chandigarh, Chennai, Coimbatore, Delhi NCR, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna, Pune and Ranchi. The survey respondents were two-fold – customers and dealers. Respondents included 220 customers and 112 used-car dealers across the mentioned cities. The survey respondents include 67 per cent between the age group of 26 to 35 and 22 per cent between 36 to 48 years old.

The report indicates that, while the customer has a budget in mind, they were open to fully utilizing it or even extend the budget to acquire the product they felt was right. The customers are willing to extend their budges up to 20% and the nature of the dealership seems to have an influence over this decision.

The survey also talks about the age of the car where most of the customers prefer to buy a 2-4 years old car. This trend is largely similar across regions and from both customer and dealer perspectives. Customers in North and East India region seem to buy 4-6 years old cars in slightly greater proportion. The OEM affiliated and Multi-brand dealers sell a relatively higher percentage of used cars that have run more than 50,000 km in comparison with local traders and other types of dealers, possibly indicating the comfort with the warranties that are provided with refurbished cars.

Other key findings from the survey report include:

  • The buying process: As in the case of the new cars, the used car buyers too depend on word-of-mouth. The internet is used for sourcing information. The customers make more than one visit to the dealers before they buy. Interestingly, the share of the internet based players as it relates to sales volume was seen to be quite small across the regions.
  • Financing the purchase: According to the survey, about 21 per cent customers required loan/financing to purchase the car. 57 per cent of these customers approached banks for loan, 17 per cent opted for dealer-nominated finance companies or banks, 11 per cent sought loan from OEM-owned finance companies and 9 per cent approached NBFCs.
  • Nature of purchase: A majority of the used car customers are first-time buyers, 78 per cent of them being from South and West India. North has the lowest level of first-time buyers at 62 per cent. Among these, a high numbers of customers have upgraded from owning a two-wheeler to a car. 38 per cent of customers from North are repeat buyers and 18 per cent of them owned a used car previously. 20 per cent customers from East were used car owners previously.
  • Usage: Contrary to popular perception, a majority of customers buy the used car for personal use. More number of customers from East buys the used-car for both personal & commercial use. The dealers also expect most of their urban customers to be buying for personal use. Unlike the OEM affiliated dealerships, the local traders/agents and stand-alone multi-brand dealers seem to attract more customers who buy for personal and commercial use.
  • Customer visits: Majority of customers across all regions visit a minimum of 1-2 sellers before finalizing the purchase. 71 per cent of the customers buying from OEM affiliated dealers decide on the purchase by visiting 1-2 dealers and 66 per cent of these customers finalise the purchase within 5-10 days.

Please click below link to view the entire report:

Deloitte_Urban used car market report_2016