How the pandemic gave a boost to pre-owned luxury car segment
The pandemic and the spurt in online retail provided a major impetus to demand for pre-owned luxury cars.
In the last decade, the pre-owned luxury car market was in the middle of rapid evolution. Several factors like purchasing power, investment environment, operating practices were cumulatively influencing the consumer preferences. This trend was amplified due to the Covid-19 induced pandemic that fostered certain changes which ramped up the evolution of the used car market like never before. It gave the desired fillip to the industry post lockdown.
According to experts, it is expected that the used car market will grow at a CAGR of 15.12 percent between 2020-2025, indicating the immense scope of growth in the sector. The rising sensitivity towards health and hygiene initiated major behavioral changes amongst the consumers. The social distancing norms triggered the preference for personal mobility as people were being suspicious about public transport.
According to a survey by Crisil, people who preferred public transport systems before Covid-19, were highly skeptical about it post-pandemic. Commuters were overwhelmed with a certain sense of fear and distrust when it came to congested buses, metros and local trains. This encouraged people to consider a personal vehicle for day-to-day travel. Among these, there were a substantial number of people who were highly sensitive about the auto costs in the recession. These groups showed a great inclination towards purchasing a pre-owned car. Additionally, the lockdown extended the timeline for the restart of auto factories, delaying the delivery of new vehicles in the market. This immensely discouraged the sentiments of the global consumers who showed signs of declined confidence in the new vehicles across the globe.
While the pandemic gave a much-needed impetus to the increased sales of the used car, there were other factors as well that cumulatively influenced people to opt for a pre-owned vehicle. Even before Covid, the BS-VI had set the stage for the growth of pre-owned vehicles. Aimed at reducing environmental pollution, the move championed highly advanced technologically resilient vehicles. The soaring prices of new vehicles made the value proposition of pre-owned cars stronger amongst the buyers.
The emergence of millennials as potential buyers has seen a trend in the reduction of ownership periods which generally range from 6-7 years to 2-4 years. For them purchasing a used car comes as the most viable solution to keep up with their desires. This desire to own exotic cars has extended the market to the mid and premium segment in the pre-owned car industry. The stance is further strengthened with the improvement in the disposable capacity of the buyers. The first-time buyers are also showing great interest in the segment as the banks are tightening the financing option for new vehicles. Consequently, it is amplifying the preference for the used car and paving the way for the robust growth of the sector.
All the factors together coupled with the paradigm shift towards an online platform has provided just the right mix to experience exponential growth of the segment. Creating a digital presence fast-tracked the occurrence revolution into months that otherwise would have taken years to formalise. Online buying and selling helped new consumers to explore through a wide variety of options. The new online model compensated for the lack of options that local dealers in weaker sections could not offer. From offering a variety of models to customizing features, online purchasing has made the process much easier. It has accounted for easy availability of inventory and even enabled seamless shipping across the states.
The industry players are also taking great care to add value to the consumer experience and make it a hassle-free process. Consumers have shown great interest in cars with recent models which are not more than 4 years old. The demand for such cars is stronger at the dealers because of the low APR financing along with the surety of certified pre-owned vehicle.
The digital shift during lockdown acted as a blessing in disguise. Where all the other industries were facing the brunt of the economic slowdown, it accelerated the demand for pre-owned vehicles. Earlier where the used car market was unorganized and fragmented, the professional players pushed for a digital presence which gave a fillip to the automobile sector.
The premium and luxury also have been riding the wave of used car segment growth and have been witnessing a greater churn and supply. Online buying and selling of pre-owned cars has not been a new concept, it has been there before but the pandemic only took it to the next level where the efforts got recognized by the masses. It has opened new avenues for tech-driven services that enables doorstep pick-up, post-purchase warranties, value-added services, financing, etc. together that ensures a higher margin of the pre-owned car industry.
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