The India Car Finance Market includes financing of both new and pre-owned cars. The India Car Finance Market has emerged as one of the fastest growing markets since past few years. The major driving force behind this market has been the total number of cars sold in the country. Although buyers in India prefer a new car over a Second Hand Car, however there has still been a sustained rise in the pre-owned car sales especially after FY’2012. On the other hand, the new car sales have always been on a growing trend but also faced few glitches in terms of slow down of car sales in FY’2014. High population in the country, with approximately 66% of people in the middle income class and a large proportion of people in the young age group has turned the country’s car market into an attractive investment opportunity. Car finances have observed elevation in demand since the middle class prefer to make payments in small monthly instalments instead of submitting the full amount instantly. Moreover, for the upper rich class, it serves as a tax saving incentive hence they choose financing options as the EMI paid serves as the expense for the business. This has resulted in increased finance penetration in the country to over 74% of the car sales for the new cars and 45% for the used cars as of FY’2015.
The pre-owned car finance market has emerged as one of the fastest growing market in the previous few years. This industry has been majorly driven by factors such as reduction in average ownership period of cars, higher penetration of banks, higher urban population and higher sales of the used cars in the country. During the review years, the industry has grown at a CAGR rate of 24.1%.
Pre-owned car finance industry is segmented into online and offline segments. These include loans which are provided online through internet or offline through direct interaction between customer and the financier. Many of the major players in the offline car financing also have their counterparts in the online car financing segment for example HDFC Bank, ICICI Bank and more. There is a great chain of factors to consider while going for the online or the offline platform. India being a developing country with high youth population and higher broadband penetration, large number of people are dependent on the internet for most of their work. Also, other factors such as interest rate, processing fees and reliability have been considered to opt for either online or offline loans. In the year FY’2010, the online loans for pre-owned cars were observed negligible in comparison to offline loans at around 2% while in FY’2015 this percentage has increased to approximately 7%. Such a trend has been observed since online loan providers have not been very comfortable to provide the loans as there has been no methodology developed to ensure the genuine nature of the vehicle.
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Ankur Gupta, Head Marketing & Communications