The second-hand car market has seen 10-12 per cent growth in 2003-04 over the last fiscal.
Much like the market for new cars, the growth in the used car segment has been fuelled largely by the availability of cheap finance.
"Easy availability of cheap finance is one of the main triggers of the growth in the used car market. There has been a substantial reduction in interest rates on used car loans in the last year," said Vinay Sanghi, chief executive officer of Automartindia.
An unprecedented growth of around 30 per cent in the passenger (new) car segment has also revved up the used car market.
"The growth in the new car market is good news for the pre-owned car market. It increases the availability of pre-owned cars and makes it more vibrant," said a spokesperson at Maruti TrueValue.
Interest rates on used car finance was traditionally five-six per cent more than the interest rates on a new car.
Over the last 12 months, the interest rates on used cars have slipped from 19 per cent to 14.5-15 per cent.
Though this sounds steep when compared with the interest rates on new cars (seven-eight per cent) Sanghi of Automartindia expects the used car finance to get even cheaper and touch seven-eight per cent.
The largely fragmented used car market stands at around 850,000 - one million cars (the number is disputed because of the largely unorganised nature of the business) with organised players such as Mahindra & Mahindra, HDFC, Sah & Sanghi, Automartindia and Maruti TrueValue accounting for a small (less than 5 per cent) part of it.
But even when a deal is struck through other channels, finance is readily available through State Bank of India, ICICI Bank and Citibank.
The ratio of pre-owned cars and new cars in the Indian market is estimated to be 1:1 but the penetration of organised finance is only 55-60 per cent. In developed markets such as the US, this ratio is 2:1 suggesting that there is tremendous growth potential in the Indian pre-owned car market.
