“I prefer to pay more for a bigger better car: Used car buyer’s perspective”
Used car industry in the past 5 years has seen a prolific change, gone are those days when you need to rebrand ‘used’ as ‘pre-owned’ to attract the customer. Today’s customers are very comfortable with used cars and have understood the rationality of buying one.
This can be substantiated by certain very interesting data. Google search results for ‘used car buyer’ reveals that over 95% of 3,00,000 searches, happening in the net, are for used car. In fact most of the users do not understand pre-owned cars; the searches for the same are negligible.
“Value for money” – Emerging as key driver for purchase
A car buyer’s need for a bigger better car is becoming a major driver of used car purchase, slowly moving away from budgetary constraints and lack of money.
For instance Ravi Shankar and Jagjit Singh are software developers working in India’s leading IT firm. It has been 3 years since they passed out of their engineering colleges. They recently returned from their onshore stay of 1 year in United States. Both kept aside a budget of Rs. 6 lakh from their savings abroad for their first car purchase. Ravi went on to buy a mid-variant of a popular hatchback, whereas Jagjit wanted a better value for his money and purchased a certified fully loaded Honda City.
The choice of Jagjit, where he feels Honda City is a better choice or value for money, is the reason that over 29% of used car buyer confirm to, when we analyzed a section of over 6,000 used car buyers.
Though affordability is the key factor for 35% buyers, 65% of buyers have other rational reasons for choosing a used car, 20% buy a certified used car as a second car, while 7% feel used cars are good options to get trained before upgrading to a new car.
Another interesting fact revealed by our research is that only 49% of used car buyers opt for auto loans as compared to 60% buyers in the new car market. The major reason for this is the prevailing used car interest rates, which is as high as 16-18% compared to 10-12% for a new car.
We also discovered that the average ticket price paid for used cars has seen a 20% increase from 2010, moving up from 3.18 lacs to 3.80 lacs in 2014. With this amount of money the used car buyer could have easily afforded a new car. Yet the thought of maximizing the value for the price paid, through a bigger car, keeps them attracted towards used cars.