After BMW and Mercedes-Benz, German auto maker Volkswagen is set to enter the used car segment in India.

"We have been in the Indian market for quite sometime. We think there are people who want to change their car after two-three years. There is a demand for pre-owned cars here and we think this is the right time to enter the segment," said Neeraj Garg, director, Volkswagen passenger cars, group sales India.

He, however, refused to say when. But sources say Volkswagen may foray into this venture by May. It has two other brands under its belt - Audi and Skoda.

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Volkswagen Finance India, a part of Volkswagen Financial Services AG and wholly-owned subsidiary of the German auto maker, has recently received a licence from the Reserve Bank of India to start a non-banking finance company to finance the company's pre-owned cars.

Mercedes-Benz was the first luxury car maker to foray into the used car business in the country, in 2009. BMW started in June last year.

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Though there are chains of branded used cars such as Maruti's TrueValue, Honda Auto Terrace, Ford Assured, Toyota U Trust, Hyundai Advantage and Mahindra and Mahindra's First Choice, the market in India is still unorganised.

"This is a very personalised business. The organised sector is hardly four to five per cent of the total used car market. But if you consider people like us who are in a way organised, offer warranty and other facilities, it can be said that almost 20 per cent of this market is organised," said Arif Fazulbhoy, director, Fazulbhoy Motors, one of Mumbai's largest used car dealers.

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These dealers, who seem to be offering more competitive prices than the auto makers, are not very worried about the entrance of the auto companies into business.

"The entrance of the automobile companies into the used car business has not affected our business that much.

There is a price difference of around 10 per cent between our prices and the prices they offer. For example, we would sell a 2004 model Mercedes for Rs 10 lakh (Rs 1 million), while they would sell it for Rs 12-14 lakh (Rs 1.2-1.4 million). Only, they have the benefit of their brand name," says Fazulbhoy.