The COVID-19 pandemic has changed urban mobility in several ways. Most people have started to avoid public transportation modes, including buses, autos, local trains, and taxis. With the fear of the deadly coronavirus and social distancing norms in place, a high percentage of the population is looking for private commuting options.
As a result, the demand for new two-wheelers and cars has constantly been surging since the first lockdown in 2020. Purely because of their affordability factor, standard two-wheelers and small hatchback cars are the ones that are in maximum demand.
It is also a fact that a significant part of the Indian population still can’t afford to buy a new car despite the demand for personal transportation at an all-time high. This economic uncertainty has been prevailing since the first lockdown as it prevented consumers from making expensive purchases.
This has given rise to the adoption of several new concepts that can benefit car ownership, albeit at lesser costs. For example, car leasing, car sharing, etc. Besides, there has been a phenomenal growth in the sales of pre-owned cars in India.
In this article, we will talk about the factors that have led to the growth of the pre-owned car market in India, the benefits of buying a pre-owned car, and what are the crucial features that you need to check before purchasing a pre-owned car. Let’s get started.
Something that has been previously owned and used by someone else and is now up for sale is called “pre-owned”. The exact definition holds for a car as well. A pre-owned car is essentially a car that has already been used by someone and is now up for sale for a new buyer. The person who purchases a pre-owned car is termed as the buyer or second owner of that car, and the person who sells it is called the seller or first owner.
A pre-owned car is much cheaper than a new car of the same make and model. It’s because a car, being an electrical and mechanical product, suffers depreciation in its value through gradual wear and tear over the years.
Generally, a new car suffers a depreciation of around 10% in its value every year after its purchase. The value of a car starts depreciating from the moment its owner takes it out of its showroom.
We have already mentioned before in this article that the demand for personal mobility shot up by multiple times in India after the COVID-19 pandemic. And those who weren’t able to buy a new car turned towards the pre-owned car market to ensure that they don’t have to depend on public transportation modes for their mobility.
As a result, the pre-owned car market in India witnessed a huge boom in the last two years. A study has revealed that the size of the second-hand car market in India was almost double that of the new car market size in 2020. Another study showed that the volume of pre-owned cars sold in India grew by nearly 50% on a YoY basis in December 2020. And, as per the estimates, the sales figure for pre-owned cars in India is likely to touch 70 lakhs by 2025-26.
Numerous factors have been responsible for this phenomenal growth of the pre-owned car market in India. These include a heavy demand for personal mobility after the pandemic, changing consumer perception about second-hand cars, entry of the organised players in this market, and availability of second-hand car loans in India, among others.
Apart from providing the benefits of car ownership at much lesser costs, there are several other perks of buying a pre-owned or second-hand car.
1. Saves a lot of money
Second-hand cars come at much-reduced prices as compared to the new ones. They also offer a value for money to the buyers for the amount paid by them. A person can save a lot of money by buying a second-hand car of their favourite make and model.
For example, the brand new VXI variant of the new Maruti Suzuki Swift Dzire costs around Rs. 8 lakhs at dealerships. However, one can get a second-hand version of the same model and same variant at around Rs. 3 lakhs to Rs. 5 lakhs, depending upon the car’s age and condition.
2. The bulk of depreciation has already occurred
The value of a new car starts depreciating from the moment its owner takes it out of its showroom. The maximum depreciation in a car’s value occurs during its initial two to three years after purchase. And after this initial period, the rate of depreciation for a car slows down.
However, the case is different with second-hand cars. The bulk of depreciation in a car’s value has already occurred by the time it goes from its first owner to the second owner. It means that the second owner of a car won’t have to suffer much loss even when they sell their second-hand car.
3. Lower insurance and registration costs
The on-road price of a new car is always higher than its ex-showroom price. It's because the on-road price of a vehicle includes some additional charges, such as RTO registration fees, insurance costs, etc.
By buying a pre-owned car, a person can save oneself from incurring such costs. Since a pre-owned car has already been registered with the RTO, they won't have to pay new registration charges for it. Additionally, since a pre-owned car's insured value (IDV) is less than a new car, it will attract lower insurance costs.
4. Thoroughly inspected cars from certified dealers
Several people refrain from buying a second-hand car because of the fear that it may start causing problems after a few months. However, the scenario has changed rapidly since the arrival of the organised players in this sector. Several top car manufacturing companies, including Maruti, Hyundai, and Mahindra, have also entered the pre-owned car market.
To ensure peace of mind, one can purchase a second-hand car from these certified pre-owned dealers. These dealers sell cars only after thoroughly inspecting them and certifying them as per their physical and mechanical condition. Moreover, these second-hand car dealers also provide warranties against any mechanical issues to their cars during the first 12 months.
5. Better for the environment
Buying a second-hand car is the best option for those who can’t afford the first-hand car. However, another good thing about these cars is that they are good for the environment.
As you know, petrol and diesel vehicles emit a cloud of smoke from their exhaust pipes which is very harmful to the environment. By buying a second-hand car instead of a new one, you can reduce the emission of this harmful smoke into the environment. Not only petrol or diesel cars but the newer hybrid vehicles also use lithium-ion or nickel-hydride batteries which can have detrimental effects on the environment.
6. Availability of pre-owned car loans
The availability of pre-owned car loans has made car ownership even more affordable for consumers. Those who can’t pay the upfront cost of buying even a pre-owned car can avail of these loans and pay for the car in easy EMIs over a convenient tenure.
There are several banks and non-banking financial corporations (NBFCs) in India that offer pre-owned car loans. Some lenders even provide up to 100% financing for the purchase of second-hand vehicles.
Also Read :- Top 5 Benefits of a Pre-Owned Car Loan
The benefits of buying a pre-owned car must be clear to you by now. It allows you to enjoy car ownership and the comforts associated with it without paying an enormous upfront cost. You can also do your bit for the environment by buying a pre-owned car.
However, it’s crucial to check certain features in a second-hand car before buying it. It’s only to make sure that you’re buying a good vehicle and not a problematic one. Below is a list of features you should check before purchasing a pre-owned car from an owner or a dealer:
1. Check the car’s condition
It might be a second-hand car, but it will be your "new" car. You would never want to buy a car with a damaged body or unacceptable physical condition. Whether you're purchasing a first-hand or a second-hand car, you will always want your car to look like a brand new one.
Hence, you should thoroughly inspect the condition of a car before buying it from a dealer or an owner. Have a look at the car from all angles and poor lighting conditions. You should check not only its exterior but also the interior. If you find minor damage or tears, you can ask the owner or seller to repair it.
2. Check the engine’s condition
The engine of a car is like a heart in a human’s body. A car is nothing without its engine. Therefore, it’s very crucial to check the condition of a car’s engine before buying it. The best way to do this is to take a test drive of the car.
While taking the test drive, make sure that all components including clutch, gear, and accelerator, are working smoothly. Pay attention if the car is giving jerks while revving up or braking or if the acceleration and deacceleration are smooth. Buy the car only if you’re fully satisfied with its performance.
3. Check all documents of the car
Do you know the purpose of your identity card? It’s to establish your identity. Similarly, a car’s identity is established by its Registration Certificate or RC. Without an RC, you cannot confirm the ownership of a car. Apart from the RC, other documents such as a valid insurance policy, pollution under control certificate, tax token, and a permit (for commercial vehicles) are necessary to drive a car.
That is why it’s crucial to check all these documents before buying a second-hand car. Make sure all of them are authentic. This will protect you from becoming a victim of fraudulent selling.
4. Check for modifications in the car
This is very important. Before buying a pre-owned car, check if the previous owner has made any modifications to it or not. If yes, then what are they and what is the current condition of those modifications.
It’s advisable to buy a car which is in as original state as possible. It’s because modifications can ruin the originality of the car which may not be good for its long-term health. Also, some modifications such as putting a black film without permission may make a car illegal to be driven on roads.
5. Check the functioning of the car’s internals
There are a lot of things inside a car that contribute to the luxury and comfort of the driver as well as passengers. These include air conditioner, music system, cruise control, seat massager, etc.
Before buying a pre-owned car, check the features that are there in it. Also, make sure that all of them are in proper working condition. In case you find any of them in a malfunctioned condition, you can ask the owner or dealer to repair them.
6. Check if it’s eligible for a pre-owned car loan or not
It’s crucial to know that not all pre-owned cars are eligible for second-hand car loans. Usually, lenders do not provide pre-owned car loans for vehicles that are more than five years old or in an accidental condition.
So, if you’re planning to buy your pre-owned car on loan, make sure that you check if it’s eligible for it or not.
Availing of a pre-owned car can help you immensely turn your dream of owning a car into a reality without emptying your pocket. However, you must check a car thoroughly before signing the RTO transfer papers. If you don't have the required knowledge or expertise, you can take a mechanic along with you when you go out to buy a pre-owned car.
If you want to avail of a pre-owned car loan, you can look at the loan options of Poonawalla Fincorp. We provide a gamut of loans, including used car loans, personal loans, home loans, etc., to help you fulfil your various dreams.
A Loan against property is a secured loan granted when you offer your existing residential or commercial property as collateral.
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