India's Used Car Market Set to Expand 8-10% This Year, Double New Car Growth Rate

India's used car market is projected to grow 8-10% this fiscal year, reaching approximately 6 million units and expanding at more than twice the rate of new car sales, according to a new report by Crisil Ratings.

The used car segment's market value is estimated at Rs 4 lakh crore, nearly matching new car sales figures. This growth has pushed the used-to-new car sales ratio to 1.4 from less than 1.0 five years ago, marking what analysts describe as a structural shift in consumer behavior.

Several factors are driving this expansion. Value-conscious demand, rising digital adoption, and improved access to vehicle financing have made used cars more attractive to buyers. The segment has also benefited from rare earth magnet shortages that are delaying new car deliveries, prompting consumers to consider pre-owned alternatives for quicker access to vehicles.

"The improvement in the used-to-new car sales ratio signals a structural shift, driven by rising consumer confidence and digital adoption," said Anuj Sethi, Senior Director at Crisil Ratings. He noted that the average age of used cars is steadily declining and is expected to reach around 3.7 years, reflecting quicker upgrade cycles.

Despite this growth, India's used-to-new car ratio still lags behind mature markets. The US maintains a ratio of approximately 2.5 times, while the UK reaches 4.0 times, Germany 2.6 times, and France 3.0 times, suggesting room for further expansion in the Indian market.

The organized segment, which includes six major online used car companies such as CarDekho, Cars24, and Spinny, accounts for half of the organized market and one-third of total used car sales volume. These companies have been experiencing revenue growth but continue to face profitability challenges due to high operational costs for refurbishment, logistics, and customer acquisition.

However, the sector appears to be moving toward financial sustainability. Crisil projects that most players will achieve operating breakeven within the next 12-18 months as they implement integrated service offerings including inspection, refurbishment, financing, insurance, and doorstep delivery.

"The shift towards integrated service offerings, along with tighter cost control, should help narrow the losses gradually," said Poonam Upadhyay, Director at Crisil Ratings.

The organized players have collectively raised over Rs 14,000 crore through equity funding since fiscal 2019, providing sufficient cash reserves to meet operational expenses and capital expenditure of Rs 800-1,000 crore this fiscal year. Recent funding rounds have been more selective as companies focus on enhancing profitability rather than rapid expansion.

The used car market demonstrated resilience during the pandemic and semiconductor shortages that disrupted new car production. First-time buyers now have access to a wider range of used car models, supported by healthy new car sales in the post-pandemic period and artificial intelligence-driven improvements in vehicle financing and underwriting.

Looking ahead, the market is expected to remain structurally stable, though the availability of quality inventory will require monitoring as demand continues to grow.