Monday, July 14, 2025
By Kamal Swami
Used cars gaining popularity—choice or increased purchasing power?
With easy finance schemes available in the market at zero per cent interest the auto industry has seen a dynamic jump in recent years. This has played a critical role in making India one of the emerging car markets across the world. The finance schemes offered by financial institutions are not only limited to the purchase of new cars but also for used cars.
According to a recent report by Crisil Ratings, used car sales in India are expected to cross 6 million units in the current fiscal. This dynamic growth is shifting the used-to-new car sales ratio to 1.4x, a steep jump from under 1.0x five years ago, and is indicative of a structural market shift. The report highlights that after a sluggish 5% growth between FY17 and FY24, the used vehicle segment grew by 8% last fiscal and is expected to grow by up to 10% this year. The market value of used cars has now reached Rs 4 lakh crore, which is equal to the sales of the new car market, indicating a dynamic change in the buying behaviour of buyers, shifting from expensive cars to used cars.
“Improved consumer confidence and digital penetration are at the heart of this shift,” said Anuj Sethi, Senior Director at Crisil Ratings. According to him, quicker upgrade cycles, stronger supply, and a growing desire for utility vehicles are moving used car preferences with new car trends. The average age of pre-owned vehicles sold is now 3.7 years, down from earlier years. Despite strong revenue, organised players in the used car space continue to face cash losses, largely due to high costs of refurbishment, logistics, and customer acquisition. Still, Crisil anticipates operating breakeven in the next 12–18 months, supported by cost control measures and integrated services like doorstep delivery, insurance, and financing.
“Margins are still thin or negative,” noted Poonam Upadhyay, Director, Crisil Ratings, “but tighter operational control and enhanced services are expected to gradually close the profitability gap.” The report further states that organised players have raised over Rs 14,000 crore via equity since FY2019, with Rs 800–1,000 crore earmarked this year to scale operations and improve technology infrastructure. Meanwhile, bank credit may improve for inventory-led firms with solid collateral, as cash burn begins to ease. In contrast to new car sales, which remain sensitive to production delays and material shortages, the used car segment continues to show resilience, even attracting first-time buyers with its wider variety and shorter delivery timelines.
With India’s used-to-new ratio still lagging behind mature markets like the US (2.5x), UK (4.0x), and Germany (2.6x), Crisil sees significant headroom for expansion, especially as buyers seek value over novelty. As the economic landscape evolves, the booming used car market may well be a reflection of tightened household budgets—raising a pressing question: Are Indians losing the financial muscle to buy new cars?
