New Delhi, July 13: Used car sales in India are expected to exceed 6 million units this fiscal year, driven by growing value-conscious demand, increasing digital adoption, and improved access to financing, according to a report by Crisil Ratings.
This growth has pushed the ratio of used-to-new car sales to 1.4, up from below 1 five years ago. The volume of used car sales is now growing more than twice as fast as that of new cars. While the segment grew at a modest 5% between FY2017 and FY2024, it registered an 8% rise last fiscal and is projected to expand up to 10% in the current fiscal year.
The market value of used cars is estimated at around ₹4 lakh crore, nearly equaling the value of new car sales. However, organized players in the used car segment are still facing financial challenges, incurring high operational costs related to vehicle refurbishment, logistics, and financing. These players remain in an expansion phase, resulting in ongoing cash losses. Nevertheless, Crisil expects strong revenue growth to lead to operating-level breakeven by the end of this fiscal or the next.
In the meantime, the credit health of these companies will hinge on their ability to raise funds in a timely manner and maintain sufficient liquidity to support their growth.
Anuj Sethi, Senior Director at Crisil Ratings, noted, “The increase in the used-to-new car sales ratio to 1.4x from under 1.0x five years ago marks a structural shift. This is being driven by higher consumer confidence, digital adoption, and robust supply. The average age of used cars is also falling and is expected to reach 3.7 years, indicating quicker upgrade cycles and growing demand for utility vehicles—paralleling trends in the new car market.”
The report points out that India still has substantial room for growth in the used car segment. The current used-to-new car sales ratio of 1.4 times trails mature markets such as the US (2.5x), UK (4.0x), Germany (2.6x), and France (3.0x).
The used car market has demonstrated resilience, maintaining stable volumes even during the pandemic and semiconductor shortages that disrupted new car production. It is likely to stay strong amid ongoing rare earth magnet shortages that are delaying new car deliveries, prompting buyers to opt for pre-owned vehicles for faster access.
Additionally, first-time buyers now have a wider array of used models to choose from, thanks to robust new car sales in the post-pandemic period. Better access to financing—fueled by lender-platform partnerships and AI-driven underwriting—is also supporting this shift.
While profitability remains a hurdle, the rapid growth of organized players continues. Poonam Upadhyay, Director at Crisil Ratings, explained, “High costs of customer acquisition, logistics, and refurbishment continue to strain operating margins, which remain thin or even negative for many players. However, a shift toward integrated services—covering inspection, refurbishment, financing, insurance, and doorstep delivery—combined with stricter cost controls, is expected to gradually reduce losses. If current cost-efficiency efforts hold, many players could achieve operating breakeven within the next 12 to 18 months.”
