Pre-owned luxury cars gain traction among buyers
High depreciation—as much as 30% in six months—makes used luxury car purchase an attractive proposition
Mumbai: Businessman Santosh Kumar, who lives in Muzaffarpur, Bihar, bought a second-hand BMW 5-Series sports sedan last month.
“I liked the car and bought it,” said Kumar casually, not willing to go deeper into the reasons for the purchase.
Bose, who runs a hospital in Munger and often travels to his hometown Kolkata, wanted a vehicle that could not only negotiate the pot-holed roads better, but also scored high on novelty.
“I went for a second-hand one, as I would be exchanging the Freelander 2 in the next two to three years,” said Bose.
Affluent, novelty-seeking buyers like Kumar and Bose are increasingly turning to the second-hand market for luxury vehicles—a trend that until not so long ago had been confined to the mass car market.
The trend is particularly visible in small cities and towns, where the newly rich who want to be part of the elite club of luxury car owners would rather buy used vehicles that cost much less. High depreciation—as much as 30% in six months—makes used luxury car purchase an attractive proposition.An increasing number of luxury cars on the roads—a function of the brisk sales of new vehicles—has made more of these available in the pre-owned market. Some 29,600 new luxury cars were sold in India in 2013, up from 26,500 units a year ago, according to I.H.S Automotive, a sales forecasting and market research firm.
“The demand for the pre-owned luxury cars has been growing in sync with new cars,” said an executive at New Delhi-based pre-owned luxury cars dealer Big Boy Toyz Pvt. Ltd (BBT). He declined to be identified.
To be sure, the pre-owned luxury cars market is small, making up just 2% of the overall used car market, according to Vinay Sanghi, promoter and chief executive of MXC Solutions India Pvt. Ltd that owns country’s largest car trading portal, cartrade.com, with 120,000 cars listed on its site.
The current size of the overall used car market is close to 2.5 million units. Sanghi, whose firm works with car dealers across the country and is offering a platform connecting buyers and sellers, says the listing of pre-owned luxury cars has doubled to 4,000 over the last couple of years.
Similarly, carwale.com, has seen its luxury car listings go up to 2,982 cars as of September from 1,234 units a year earlier, said Banwari Lal Sharma, assistant vice president of marketing at automobile website.
“It’s an opportunity for first-time buyers of luxury cars to fulfil their aspirations,” said Puneet Gupta, principal analyst at IHS Automotive, about the increasing traffic of buyers and sellers.
Kumar paid Rs.30 lakh for a four-year-old 5-Series that had run 20,000km—half of what he would have paid for a new car. Bose bought the four-year-old Freelander2 that had logged some 45,000km, for Rs.24 lakh, against the Rs.39 lakh he would have had for a new model.
To be sure, besides the traditional channels including the sundry dealers and agents, the increasing demand is also spawning newer channels of sales, which include authorized pre-owned outlets of luxury car firms, dedicated online car websites and organized multi-brand outlets.
“With all the luxury car manufacturers present in the pre-owned car business, the segment is getting more organized and expected to have a significant presence in the used car business,” said Kern.
This is largely being driven by the reduction in replacement cycle—two to four years now, as compared with three to five years three years ago, he said.
A south Mumbai-based dealer of the firm who also deals in pre-owned cars said authorized dealers like him can sell more, but for the supply constraints. “Not everyone will come to us for selling their old car,” he said on condition of anonymity.
All company authorized outlets claim to recondition cars with genuine parts, offer multiple checks and two-year warranty, among other services, to used car-buyers.
Gupta of IHS Automotive said the used car business is of great significance for all the luxury car makers. “Having experienced the brand, there is a high probability of the buyer of a used car coming back into the showroom for a new car,” he said.
Joe King, head of Audi India Pvt. Ltd, market leader in the luxury car segment, said a new segment of young buyers has emerged in the used luxury car market—professionals and executives and first-generation entrepreneurs.
In April, Audi launched a dedicated showroom in Gurgaon for used cars. Going ahead, it plans to start Audi Approved Plus—offering a car park of more than 1,000 vehicles. It would also have more dedicated showrooms in different regions across the country “to make the pre-owned luxury car buying experience easier and affordable”, said King.
BMW India Pvt. Ltd was the first luxury car maker in India to start pre-owned car showrooms under the brand BMW Premium Selection in 2011. It has such dedicated showrooms across all the key cities including Delhi, Mumbai, Bangalore and Ludhiana.
“The BMW Premium Selection has introduced many new customers to the BMW brand,” Sahr said.
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