In India, nearly 80 percent cars are bought on loan. Cars, like many other consumer goods have their resale value as a significant parameter driving sales. The amount your car will fetch in the used car market is important because it’s this amount which will partially fund the purchase of your next car later. If you get a good resale price, your loan for the new car will reduce accordingly.
Quikr, India’s leading online classifieds company, has Cars as one of its busiest categories. Being in the car resale service for over five years it was time to have a look back. A research was carried out on the online data created from the ads posted by consumers in the last 1 year in the cars category. Four brands of cars with the most number of ads on average were picked for some in-depth research. These were Chevrolet, Honda, Hyundai and Maruti. Visibly, having different price belts, these brands also form a price segregation of sorts. The cars were up to a maximum of 10 years in age.
It was discovered that most brands show a typical resale lifespan of 5-6 years. While the total demand for used cars was askew towards certain brands, the time taken to sell a used car was around 20 days and consistent across different brands and price segments. Resale value of medium to premium segment cars fell faster compared to entry segment cars. Details of the above findings and more are shared in the sections below.
1. In India, used cars have a best resale lifespan of around 5-6 years
The adjacent infographic summarizes the percentage of used cars by age for sale on Quikr all over India for each of the four brands. Hyundai, stands out as a clear outlier from the general trend and stays resale friendly for a considerably long period from the year of make. While Chevrolet and Maruti, after approximately 5 years fall fast in resale strength, Honda does so comparatively slowly and after 6 years.
Since beyond the 5-6 years age period the prices generally fall, we see that more than 50% of the cars are back on the resale market by their 6th year. The trends show that the average period that a car spends with their first buyer is 5-6 years, which seems to be the purchasing cycle for most of the car brands.
2. Resale value of medium to premium segment cars fall faster than entry level segment
Car resale prices for the above mentioned four brands were aggregated according to their year of make to find the trend these prices follow, as a function of car age. The approximate dropping rate for car resale prices for each segment was found to be:
- Chevrolet : INR 38,000/year
- Honda : INR 58,000/year
- Hyundai : INR 31,000/year
- Maruti : INR 32,000/year
Hyundai and Maruti, effectively belonging to a similar price segment, also show a similar trend in depreciation in resale value, here. Chevrolet, although being a generally expensive brand name shows a much slower depreciation rate compared to Honda. However, reasonably, the diminishing price was divided by the average price of the segment to proportionally find the resilience of cars of that segment, with age. Evidently, Honda shows the maximum slope. This quantified diminishing utility was then divided by the average price of the brand just to further find, that it still stayed the highest. Thus, taking average prices of each of the brands above, the effective diminishing utility in terms of resale was found to be the maximum of a Honda car. Thus a Honda loses worth fastest. That a Chevrolet, which belongs to the premium price belt among the listed cars shows much better resale prospects, is pretty good news for the Indian buyer.
3. Average time taken to sell a used Maruti or Hyundai car was less than other brands
The average time needed to re-sell your goods is an important parameter to determine the market demand. It so turns out that, for cars it doesn’t take more than a month, in India, to sell it in the used cars’ market.
Feedback received from Quikr’s consumer base was evaluated to investigate the average number of days it takes for a person to sell a particular brand of car through Quikr. Maruti Suzuki and Hyundai emerged as the most resale friendly brands taking the least time for a sell-off compared with other brands found most commonly in the market. This indicates that there is a fairly larger liquid resale market existent for these cars compared to other brands.
4. The highest demand was found to be for used cars priced between 1-2 lakhs and declines consistently with increasing price
It is intuitive to think, that, for a car, higher the price, lower the interest of purchase shown by a person. More than 90% of the consumer population is seen to show interest in used cars below 5 lakhs in resale value. The demand for used cars peaks at 1-2 lakhs and steadily decreases as we move to higher price points.
Trends like purchasing cycles getting shorter, used cars fetching good prices and getting sold quickly are a clear indication of the fact that appetite for used cars in the Indian market is growing at a healthy pace. One can purchase a new car and hope to sell it off at a good price in a few years.