Demand for used cars go up by 30%

The spurt in demand for used cars, which had taken a beating following the showcasing of Nano and a 400 basis points excise duty cut on small cars, has seen a revival following the government's move to increase prices of petrol and diesel by Rs 5 and Rs 3 respectively.

Concurrently, the demand for bigger and less fuel-efficient petrol cars of Honda, General Motors and Ford, among others, has dropped by almost 30 per cent. Small cars of Maruti Suzuki and Hyundai Motors are much in demand for their superior fuel efficiency and cheap running costs.

Used cars are mostly sought after by first-time buyers, who wish to own a four-wheeler for the first time or want to upgrade from an existing two-wheeler. These buyers are short on funds and want full value for their money. Used car buyers are more price- and quality-conscious than new car buyers, said a car dealer.

Arif Fazulbhoy, director, Fazulbhoy Motors, the oldest used car dealer in Mumbai operating for over 40 years, said, "Prices of mid- and high-end petrol cars like Honda City, Accord, Chevrolet Aveo, Ford Fiesta, Mitsubishi Lancer Cedia, have dropped by 25-30 per cent since the announcement of fuel price hike. People are now demanding cars that deliver high-fuel economy.

like the ones powered by diesel, LPG and CNG. As demand for small cars has started to rise, prices have already started to increase."

Another used car dealer said the demand for small cars has picked up because of a further fuel price hike expected after the Assembly elections in 2009. "Most buyers feel there will be a further rise in fuel prices next year, which may reduce the availability of small cars in the market, leading to prices of used small car models shooting up."

The operational difference between a two-year-old car model, which includes cost of spare parts, servicing, other maintenance costs, compared with that of a new car model remains virtually nil, say experts.

The capital cost usually offers a discount ranging from 20-50 per cent between the two generation models. The gap increases with older generation cars where certain models of 2000-01 are sold for as little as Rs 72,000.

Furthermore, according to industry experts, the market is flooded with C and D segment cars, with models like Honda Civic, Hyundai Elantra, Ford Fiesta, Mitsubishi Lancer, Toyota Corolla and sports utility vehicles like Honda CRV, Ford Endeavour, Hyundai Tuscon due to the reduced demand. Prices of such vehicles are expected to fall further due to their over-supply.

Small cars, including Maruti's WagonR, Zen, Alto, M800, Swift, Omni and Hyundai's Santro and Getz have been most sought after in the used car market. These normally deliver a fuel economy of more than 14 km to a litre (kmpl) of petrol in city conditions and more than 18 kmpl on a highway. In comparison, the mid-segment cars deliver a fuel economy of less than 10 kmpl.

OLD IS GOLD

Used cars are mostly sought after by first-time buyers, who are short on funds and want full value for their money

Maruti's WagonR, Zen, Alto, M800, Swift, Omni and Hyundai's Santro and Getz have been most sought after in the used car market

A reduced demand for Honda Civic, Hyundai Elantra and Ford Fiesta may bring down their prices