Used car market guide for 2011

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Added in: Features

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New car models are landing onto our shores by the dozen, widening the choice spectrum for those who want to go for a used car. We discusses the opportunities the secondary market offers, especially in the light of the expected new launches in 2011

The new car market in India grew at a maddening rate of more than 30 percent in 2010. However, the used car market, which is still largely unorganized and less talked about, grew at an even faster pace. Although no official figures are available, rough estimates suggest that the calendar year 2010 witnessed a growth of more than 40% for the Indian used car market. And that growth is quite natural. Not all the people buying cars are buying them new. Those on a budget and with a long wishlist cannot quite drive home a new car. The used car market gives such customers the option to buy the car they need, at the price they can afford.

So does the flurry of new launches in the on-fire Indian new market affect the used car market in any way? Well, according to the industry experts, it does. According to Umang Kumar, co-founder, Gaadi.com, one of the leading used car buying-selling portals in the county, “whenever a new model is launched, or an existing model is significantly upgraded, the prices of the model in the used car market go down marginally.” There is, however, a flip slip to the story as well. According to Umang, with any increase in the price of an existing model, the prices of the model in the used car market also go up.

Commenting on the challenges faces by the used car industry, Umang say, “there is trust deficit in the used car market, as there is no way to find out whether you are getting a good car or a lemon. Also, the demand for used cars is much higher than the supply. On our own portal, there are 4 buying queries for every 1 sale query.”

He attributes this deficit to the high growth in the Indian new car market. “In most developed markets, the used car to new car transaction ratio is 3:1, however, in India it is close to 1:1. What drives this fact is that any point of time the supply of vehicles is a function of the past sales. A few years ago, the sales of new cars were much lower than the current demand of used cars, as we are growing at a rate of 30%”.

Clearly, there is an opportunity in the used car market to get a better bang for your buck. Here’s what you need to know for an informed buying decision.

Should I buy a used car now, or should I wait?

Typically, if the car model that you are interested in is going to be replaced by an entirely new, or substantially face lifted version in the same year, you have a good reason to stop and wait. However, if a replacement or an upgrade is not on the cards, the market price of the car of your choice is not expected to change much through the year. Here is a list of the mainstream cars which are slated for replacement/upgrade in the year 2011.

Maruti Suzuki Swift, Tata Nano, Chevrolet Spark, Swift Dzire, VW Jetta, VW Passat, Honda Civic, Chevrolet Aveo, Ford Fiesta

What is the best way to go about buying a car – agents, personal contacts or branded used car marts?

There isn’t quite a better way to buy a used car than getting it from someone you know closely. The usage patterns of the car would be much clearer to you, and the chances of you being conned will be lesser. Another advantage comes from the fact that the hefty commissions that you (and the seller) have to pay to agents are removed from the transaction. This means a better deal for the seller as well as you.

Branded used car dealers usually perform a systematic check of all key aspects of a car’s performance, and offer the car with a warranty. However, this luxury comes for a premium, and you have to typically pay anything from Rs 20,000 to 50,000 extra for the added assurance.

Getting a used car through an agent is advisable only when you know the man in question personally, and have solid grounds to believe that the car you are buying is reliable and properly priced.

What are the advantages of buying a used car?

Purchasing a second hand car, if chosen carefully, brings along many benefits. To start with, you get a bigger, better and more feature packed car for the same money that you would have spared for a smaller car with lesser features. You can buy a good condition used diesel car for the price of a petrol engine variant. Also, a used car doesn’t depreciate as quickly as a new car, as a car loses the maximum amount of its value in the first two years.

Apart from saving on the cost of the car, you start saving money on the insurance premium of the car from day one, as the value of your car is not as high as a new one. Also, for any given budget, buying a used car gives you more choice, as the prices for every used car model vary depending on mileage and year of manufacture. Unlike new cars, the price of a used car is not fixed; you can choose anything, from a small car to a diesel sedan for a budget of, say, 3 lakh rupees.

What are the disadvantages of buying a used car?

While the advantages of buying a new car are many, there are some risks and disadvantages as well. First and foremost, almost every seller would try to hide the faults with his vehicle to get a better price. Although there are quality checks to counter that in the organized car market, there isn’t really a foolproof way to ascertain the health of a vehicle. Peace of mind doesn’t come easy with used cars.

You won’t get any warranty on a used car if you are buying it from an agent or through a personal connection. The warranties offered by branded dealers too are for a much shorter period and less extensive. Used car would also typically require more repairs and maintenance than a new car.

What are the various options I have if I want to go for a used car from a branded chain?

Almost all the carmakers in the country have entered the used car business nowadays. Here’s a list of some of the leading used car brands in the country.

  • Maruti Suzuki TrueValue
  • Hyundai Advantage
  • Tata Motors Assured
  • Honda Auto Terrace
  • Toyota U Trust
  • Mahindra and Mahindra’s First Choice
  • Chevrolet OK
  • Carnation

Apart from these mainstream carmakers, even premium carmakers such as Mercedes-Benz and BMW have forayed into used car business and you can buy these luxury cars from company certified outlets. A simple Google search with the names that we have provided above will take you to the respective home pages of these used car businesses and you could choose from the certified used cars from the available list.

Apart from these branded online stores, do I have any other choices to look for a car from the convenience of my home?

The used car market in India is cluttered with companies offering to buy or sell your used car online. There are scores of such companies which offer you an option to choose from hundred of cars for any make or model, and list your used car for sale for a nominal fee. Some of the leading online portals in the business are Carwale.com, Gaadi.com, Cardekho.com and Zigwheels.com. Searching for ‘buy/sell used cars’ online will yield scores of other results as well.