The used car market has taken a worst hit due to the demonetisation of Rs 500 and Rs 1000 notes in the country. As per the auto financiers and used car sellers, the demand has dropped by 40 percent.
In the used car market only 15 to 20 percent vehicles are financed, so the cash crunch has taken a toll on the used car business as compared to the new car market. Although this situation is expected to improve by January 2017.
Senior Executive Vice-President and Business Head, Vehicle loans, HDFC Bank, Ashok Khanna said, "The used car market has been very badly affected and right now the transactions are almost nil. More than 70% of used vehicles sell on cash, and for this huge segment, the entire game has changed overnight."
Financiers have stated that after two weeks since demonetisation, the used car segment has plummeted down by 40 percent. CEO of Kotak Mahindra Prime, Vyomesh Kapasi said, "We have seen a sharp drop in demand and dealers have stopped pro curing fresh stock of vehicles as people are not buying and December is just round the corner."
The problem with the used car market is, it is dominated by unorganised players and most of the sales come from non-metro consumers. MD and CEO of Mahindra First Choice Wheels, Nagendra Palle said, "Typically, 55% of used car market is non-metro while 45% is metro markets."
The used car segment is a three million unit market, the business was growing by 15 to 20 percent. But due to the cash crisis the growth was cut short. Experts believe that this year will be a slowdown for the used car market.
But the good news is, from past couple of days the market is beginning to pick up. Head of used cars section, CarTrade, Vikram Alva said, "For 10 days after demonetisation, things were badly hit but now enquiries and traffic are beginning to normalise."
With the deficiency of cash in the market, it has benefitted the organised channels in the used car market. Alva added, "This is a very positive thing for online players as used car transactions become organised and transparent."