Used cars on speed track as new car buyers stall on affordability

Indian consumers are turning to the used car market due to rising prices, stagnant incomes, and affordability concerns.
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KARUNAKARAN M

Buying a new car may no longer be a top priority for Indian consumers. Rising vehicle prices and stagnant incomes are pushing many toward the used car market. Take Shyam, a Bengaluru resident, for instance, who told businessline, “The budget for a basic entry-level car is easily more than ₹7 lakh. Most new families I know are resorting to second-hand cars for this very reason.”

With the average cost of a new vehicle nearly doubling over the past decade, affordability is becoming a major hurdle—especially for first-time buyers.

Used- car market grows

According to Spinny, the used car segment is growing at 10–12 per cent annually. The appeal lies in affordability, flexibility, and wider access to financing. Maruti Suzuki Chairman RC Bhargava has linked the slowdown in entry-level car sales to broader affordability pressures.

Echoing this, Gajendra Jangid, Co-Founder of CARS24, said that affordability remains a primary decision factor, especially for first-time buyers, who account for 56 per cent of used car purchases on the platform. Vehicles priced under ₹5 lakh dominate demand, particularly in rural markets, where most buyers prefer models in the ₹3–4 lakh range.

Beyond purchase price, the cost of running a car—fuel, maintenance, insurance—continues to weigh on household budgets. “It adds real stress to monthly finances, especially when you factor in traffic and time lost,” said Anand, a Pune-based professional.

India’s used car market is projected to reach $40 billion by FY26, with 6.5–7 million vehicles expected to be sold, according to Spinny. Affordable hatchbacks remain bestsellers, but compact SUVs are gaining ground. Popular models include the Renault Kwid, Hyundai Grand i10, and Maruti Suzuki Swift, it observed.

Younger cars, shorter cycles driving supplies

According to Hanish Yadav, SVP and Business Head at Spinny, the ownership cycle has shortened from 6–8 years a decade ago to 4–5 years today, putting younger cars into the resale market. “The share of customers upgrading their vehicles has jumped from 12 per cent in 2023 to 22 per cent in 2024,” he said—boosting overall supply and market activity.

Additionally, more buyers are now choosing 3–5-year-old vehicles, narrowing the gap between new and used car segments.

Affordability concerns are also being amplified by stagnant salaries—especially in major metros like Bengaluru. According to TeamLease, tech sector salaries have seen annual hikes of just 8–12 per cent, while startups have offered slightly better raises of 12–15 per cent.

This sluggish income growth, coupled with rising utility costs in cities, is making car ownership harder to sustain for middle-income households.

India’s used car market is also being propelled by improved credit accessibility. Financing for used cars has grown from 15 per cent in 2010 to 23 per cent in 2024, though still lower than the 84.2 per cent financing penetration in new cars, according to CARS24.

Vineet Tripathi, Chief Business Officer at Rupyy, which is the fin-tech arm of CarDekho Group, notes a surge in EMI-based purchases, which has made second-hand cars more accessible. “This shift has enhanced affordability and fuelled strong year-on-year growth,” he said.

Startups like Spinny also see growing traction in short-term car ownership models such as subscriptions and rentals—particularly among urban millennials and gig workers seeking flexibility.

(With inputs from BL intern Rohan Das)

Published on May 18, 2025

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