India Used Car Financing Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

The market is segmented by vehicle type (Hatchbacks, Sedans and SUVs), and by Financier (OEMs, Banks and NBFCs)

Market Snapshot

Summary Graph
Study Period: 2018 - 2026
Base Year: 2020

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Market Overview

The Indian used car financing market is expected to grow at a CAGR of around 8%, during the forecast period.

The financing market for pre-owned cars is almost entirely dependent on its parent market: the sale of used cars. Ownership of cars, which used to be a status symbol long ago, has become a necessity in recent times. The automotive industry has witnessed exponential growth since its inception. Consumers are looking at used-cars ever more than before and some are even preferring them over two-wheelers.

Now-a-days majority of customers opting to purchase an automobile, depend on some type of financial assistance. The current rate of financing for used cars is just around 15% and offers a tremendous opportunity for manufacturers as well as financial institutions alike. The disbursements towards used-cars are at an all-time high in the market and new players are also entering into this space making the industry a highly competitive one.

With BS-VI rolling out in the country from the year 2020 and subsequent mandates for necessary safety features, the cost of new cars are expected to grow up. Also, few manufacturers are phasing out their diesel portfolio and consumers who prefer diesel cars for their durability and mileage figures are also looking towards the used car space. These factors are again expected to drive the used car financing.

The market studied is segmented by vehicle type and financier. Within vehicle type, financing for SUV’s is expected to grow at the highest rate. Within financiers, Banks are expected to occupy the highest market value.

Scope of the Report

The India Used Car Financing Market covers the latest trends in the financing segment, demand for used cars, and major companies operating in the sector. The scope of the report includes:

Vehicle Type
Hatchbacks
Sedans
SUVs
Financier
OEMs
Banks
NBFCs

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Key Market Trends

Burgeoning Used Car Industry Subsequently Driving the Financing Market

The used car business in India has been picking up pace since the past few years. In 2016, roughly 3.3 million used cars were sold and in FY2019 the number breached the 4 million mark with pre-owned cars registering more sales than new cars. Currently, the ratio of used to new cars stands at around 1.3 in the country.

The evolution of used car market in the country can be attributed to the growth of the organized and semi-organized sector. Also, the revision of the GST rate on used cars from 28% to 12 - 18% is also acting as a driver to the market. Additionally, as the Indian auto-industry is entering the BS-VI era from April 2020, the value proposition of the used car can grow stronger, as new cars are expected to become expensive due to additional technology costs. With companies gradually focusing on reducing the production of diesel cars, for instance, Maruti Suzuki's decision to exit the diesel car segment by April 2020, is also expected to increase the demand for compact diesel cars (mainly due to their higher mileage figures) in the used car market, unless there is a backlash against diesel cars.

The demand for luxury cars is also witnessing a continual increase with nearly 50,000 units sold in 2018 compared to around 40,800 in the previous year. Until few years ago, owning a luxury car used to be a dream for numerous consumers, owing to financial hurdles, but this is gradually changing, as the consumers can easily buy pre-owned luxury vehicles, as the market is becoming more organized with easy access to financing options, annual maintenance contracts, and lower entry prices.

Trend 1

NBFC’s inclined towards funding used cars to recover from market slump

FY 2018 was a relatively good year for NBFCs when compared to FY 2019. In 2018, the companies registered growth of nearly 15% but are now poised to grow at only 6-8% in 2019. But even as various other industries slumped, used car financing has picked up in almost all NBFCs. Despite the on-going crisis in automobile industry, disbursement for used car loans registered positive growth of nearly 29% during the quarter which ended on June 30, 2019.

Leading NBFCs such as Mahindra Finance, Shriram Finance and Magma Fincorp have been forced to struggle with the rising cost of funds amid a liquidity squeeze that was sparked by the default by Infrastructure Leasing & Financial Services (IL&FS). Even financiers have tightened screening of borrowers and are now going slow on the relatively higher risk segments. In lieu of this situation, several lenders have turned towards funding used cars to protect their margins. For instance, Magma Fincorp’s disbursements towards pre-owned vehicles rose by 28% to INR 2,190 crore in FY19.

Anticipatory volume recovery led by BS-VI pre-buying and easing of the liquidity situation is expected to provide further opportunity to the used car financing sector. Cars24, a leading online platform that facilitates buying and selling of cars is now venturing into the financing business. The company has acquired NBFC licensing from the Reserve Bank of India in July 2019 and is aiming for a disbursement of nearly US$ 25 million in its maiden year.

Trend 2

Competitive Landscape

The market for used car financing in India is on the fragmented side. The presence of many organized and un-organized players has created such a market scenario. Also, most auto-manufacturers apart from offering their own financing, have tie-ups with banks and other financial institutions to offer a wider choice for their customers. But the relatively easier procedures to procure a loan from various NBFC’s is expected to tilt the market in their favor. Mahindra Finance, Magma Fincorp, Shriram Finance, Bluecarz, TSM Cars etc. are some of the major players in the market.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET DYNAMICS

    1. 4.1 Market Drivers

    2. 4.2 Market Restraints

    3. 4.3 Industry Attractiveness - Porter's Five Force Analysis

      1. 4.3.1 Threat of New Entrants

      2. 4.3.2 Bargaining Power of Buyers/Consumers

      3. 4.3.3 Bargaining Power of Suppliers

      4. 4.3.4 Threat of Substitute Products

      5. 4.3.5 Intensity of Competitive Rivalry

  5. 5. MARKET SEGMENTATION

    1. 5.1 Vehicle Type

      1. 5.1.1 Hatchbacks

      2. 5.1.2 Sedans

      3. 5.1.3 SUVs

    2. 5.2 Financier

      1. 5.2.1 OEMs

      2. 5.2.2 Banks

      3. 5.2.3 NBFCs

  6. 6. COMPETITIVE LANDSCAPE

    1. 6.1 Vendor Market Share**

    2. 6.2 Company Profiles*

      1. 6.2.1 Blue Carz

      2. 6.2.2 Toyota Trust

      3. 6.2.3 Mahindra Finance

      4. 6.2.4 Tata Capital

      5. 6.2.5 Bajaj Finserv

      6. 6.2.6 Maruti Suzuki True Value

      7. 6.2.7 Droom Credit

      8. 6.2.8 TSM Cars

      9. 6.2.9 Magma Fincorp

      10. 6.2.10 Shriram City

  7. 7. MARKET OPPORTUNITIES AND FUTURE TRENDS

**Subject to Availability

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Frequently Asked Questions

The India Used Car Financing Market market is studied from 2018 - 2026.

Mahindra Finance, Magma Fincorp, Blue Carz, TSM Cars, Toyota U-Trust are the major companies operating in India Used Car Financing Market.

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