Shyamal Banerjee/Mint
Shyamal Banerjee/Mint

Online classifieds drive pre-owned car sales

Average holding period of is 3 years, and smaller cars sell the mostfinds survey of car websites

Gone are the days when buying a used car was considered to be a downgrade. Not only is the number of new car owners going up, more people are buying used cars as well. According to a recent report by Google India and Mahindra First Choice Wheels Ltd there has been an increase of 20 times in online searches for used cars in the last six years, which means a compounded annual growth rate of 54%. Clearly, the online space is a big reason behind increase in used car sales.

To understand the newest trends in the pre-owned online space, Mint took a look at the types of cars that are most popular among buyers through a survey, which was conducted through emails and phone calls. We spoke to 10 portals on which pre-owned cars are sold and bought. These were Cardekho.com, Carnation.com, CarTrade.com, Carwale.com, Jainscar.com, Junglee.com, Mahindra First Choice, OLX.in, Quikr.com and V3 Automotives Pvt. Ltd. We asked them questions regarding the top five cars sold on their portals, the most popular fuel variants, the average age of the cars, and so on.

Pranay Chulet, founder and chief executive officer, Quikr India Pvt. Ltd, which runs the used goods website, Quikr.com, said, “Currently, our platform receives 1.3 million transactions per month across categories, and a gross merchandise value of $5 billion every month. Cars is one of the largest and busiest categories for us; month-on-month, we see an increasing number of buyers and sellers transacting on our platform, as well as higher success rates for the transactions."

Vehicles is also one of the top three categories of classifieds in the used goods listings for Amazon.com Inc.’s price comparison website, Junglee.com. “The listings are seeing a double-digit growth on a month-on-month basis," said Mahendra Nerurkar, general manager and director, Junglee.com.

A reason behind greater traction on online portals is more and better availability of information. “Portals are being used as a source of research, pricing, lead generation and then buying and selling of used cars," said Kunal Khattar, vice-president, Carnation Auto India Pvt. Ltd, an auto solutions company dealing in new and old cars, insurance, servicing and more.

Trends in the pre-owned car market—online and offline— run parallel. “The makes and models that are in high demand in the new car market also see good demand in the used car market," said Nagendra Palle, chief executive officer, Mahindra First Choice Wheels, which sells certified pre-used cars, and provides other auto services.

Government policy, too, plays a role in which cars people prefer. An obvious example is fuel price. When petrol prices were higher than that for diesel, there was more demand for diesel variants. Now that this gap has reduced, sale of new petrol cars is picking up. The same trend can be seen in the used-car space as well. At present, petrol price in Delhi is 66.29 a litre, and for diesel it is 52.28 a litre—a difference of about 14. In May 2011, the price of petrol was 73.18 a litre and for diesel it was 41.28—a difference of almost 32.

With the gap in prices of the two types of fuel reducing, according to media reports, manufacturers are planning to roll out more petrol cars to cater to the renewed demand. “A couple of years ago, demand from buyers for used diesel vehicles was higher. But of late we have seen number of diesel cars going up for sale, and demand for petrol cars steadily rising. This is both because of the narrowing price gap between petrol and diesel, and recent orders by the National Green Tribunal," said Amarjit Batra, chief executive officer, OLX.in, a pre-owned goods website. The Tribunal had put a ban on diesel vehicles older than 10 years from plying in Delhi-National Capital Region, which is the biggest market for new cars, and which also sees the highest number of listings on pre-owned car portals, according to our survey.

What sells, what doesn’t

The results of the Mint survey of 10 car sale portals further confirmed that what sells in the new car market also sells in the used-car market. By the latest sales volumes, the top 5 car makers in India are: Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Honda Cars India Ltd and Tata Motors Ltd. The same companies are the top 5 in the pre-owned car market too.

“Used cars are nothing but new cars being sold after the first ownership cycle comes to an end. So, they mirror the sales numbers from three to four years ago," said Khattar.

Another finding from the survey was that the holding period has reduced. With income levels rising and with many domestic and international car models available, people own the same car for 3-4 years. It is rare to see someone have the same car for, say, 10-12 years. In the survey, the average age of cars listed on online portals for re-sale ranged between three and six years.

As far as the price segment is concerned, the average ticket size of cars listed is 3 lakh-4.6 lakh. So, it comes as no surprise that most of the cars listed for resale are smaller hatchbacks.

These sites have listings from both dealers and consumers. On some, posting advertisements is free for consumers, but not for dealers. If you plan to visit these or any other car sale portal, do remember that the portal does not carry out any checks on the cars that are listed by owners themselves. “There are many listings on websites, and verifying each and every one may not be possible," said Vikram Alva, head product and digital marketing, CarTrade.com. “However, dealer-listed cars are usually put through tests before they are listed," he added.

Make sure you do your homework before buying a pre-owned car. Test drive it and try to put it through as careful an inspection as possible. Compare prices across websites to check if the listed price is exaggerated.

(Vivina Vishwanathan contributed to the story)

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