India’s organised used-car market is expected to maintain its growth momentum this fiscal, with sales projected to cross 7 million units, driven by robust demand from first-time buyers, improving digital adoption and better financing access, according to a Crisil Ratings report.
The report estimates used-car volumes will grow 7-9% during the current fiscal, while the used-to-new car sales ratio will remain above 1x, underlining the segment’s growing importance in India’s automotive landscape.
Profitability improves
A key trend emerging from the sector is the improving profitability of organised players.
According to Crisil Ratings’ analysis of five leading used-car companies, accounting for nearly half of the organised market volumes, asset-light marketplace platforms, which contribute around 85% of organised transactions, have already achieved profitability. Inventory-led players, despite higher operating costs, are also steadily narrowing losses through tighter cost controls and a sharper focus on sustainable growth.
The organised segment now accounts for nearly 26% of India’s used-car market, up from 20-21% in FY22, although the majority of transactions continue to take place through the unorganised sector.
First-time buyers fuel growth
Crisil Ratings Senior Director Anuj Sethi said first-time buyers account for nearly two-thirds of used-car purchases, making them the primary growth driver for the industry.
He noted that rising prices of new vehicles, coupled with affordability considerations, are encouraging consumers to opt for pre-owned cars, allowing them to access higher-specification vehicles at significantly lower ownership costs.
Digital platforms have also improved transparency, vehicle inspection standards and financing availability, helping formalise a market that has historically struggled with trust-related issues.
Used cars retain affordability edge
The report said demand for used vehicles has remained resilient despite last fiscal’s Goods and Services Tax (GST) rationalisation, which narrowed the price gap between new and used vehicles by only 4-6%.
Over a five-year ownership period, used hatchbacks and sedans remain about 25% cheaper than comparable new models, while utility vehicles offer savings of around 20%, preserving the value proposition for budget-conscious buyers.
The supply side has also strengthened, with the average age of used cars falling to around four years compared with more than eight years a decade ago. Faster model refreshes, shorter ownership cycles and healthy new vehicle sales have improved the availability of younger, better-quality vehicles.
Significant headroom remains
Despite the rapid growth, India’s used-to-new car sales ratio remains well below the 2.5-3.5 times recorded in mature automotive markets, suggesting considerable long-term growth potential.
According to Crisil, deeper vehicle financing, greater leasing penetration and a more organised resale ecosystem could further accelerate the market’s expansion.
Crisil Ratings Director Poonam Upadhyay said organised players are increasingly prioritising profitability alongside growth. While marketplace platforms became profitable last fiscal without raising additional capital, inventory-led companies raised around ₹3,000 crore over the past two years to support their expansion and operational requirements.
Going forward, Crisil expects fundraising in the sector to be increasingly driven by business expansion rather than funding operating losses.
The report said investors and industry participants should closely monitor factors such as the availability of quality used vehicles, residual value trends following the GST transition, financing penetration and the pace at which organised players achieve sustained profitability.