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Pre-owned car market hots up as economy slows down

Tania Kishore Jaleel & Priya Nair / Mumbai 02 Aug 12 | 12:26 AM

In the present economic scenario, where a slowdown seems to have set in, sales of new cars have been flat, while the number of used cars sold has been on the rise. According to reports, the used car market is likely to grow at 10-11 per cent this year, compared to a three-four per cent growth expected in the new car market.

Abdul Majeed, leader (automotive practice) at PricewaterhouseCoopers, however, says with purchasing power dipping, the need for a second car arises only when there is an absolute need, such as mobility.

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“With people replacing new cars every four to five years and used cars every two to three years, it makes sense to buy a used car," he explains.

For any given budget, buyers have a wide range of cars to choose from. For instance, on carwale.com, for a budget of between Rs 3 and Rs 5 lakh, there are models ranging from Honda Civics to Toyota Corollas to Skoda Fabias to Maruti Swifts.
 

WHAT TO DO
  • Buy it from a branded and certified dealer
  • Verify all details mentioned in the car's papers
  • Check fitness certificate
  • Check when the last servicing was done; distance clocked 
  • Take a mechanic along for a test drive
  • Take comprehensive motor insurance and not third-party cover alone

“Over the last few months, the share of utility vehicles in total sales has increased, though there has been a decline in the share of smaller vehicles," says Rajeev Dubey, president (group human resource, corporate services & after-market) and member of the group executive board, Mahindra & Mahindra (M&M).

Mahindra First Choice Wheels, the pre-owned multi-brand car dealership of M&M has registered a volume growth of 27 per cent in the first quarter this year.

However, there are many checks one must do before buying a used car. A Bangalore resident was forced to buy a completely new set of tyres soon after he purchased a second-hand Maruti 800. In a motoring blog he writes, “The tyres of the car looked like they were in excellent condition. However, I had a puncture within two days of buying it. When I took the car to the mechanic, I was told the tyres had been tampered with."

Being aware of a few key parameters will help you get a value-for-money deal on your used car. To begin with, buy from a branded and certified dealer. Players such as Mahindra First Choice, Maruti True Value and Carnation provide warranty papers and after sale services. For instance, if you buy a car from Carnation, your first two services are free.

“We provide breakdown assistance and warranty assistance to customers who have purchased certified cars. We have also tied up with multi-brand car service centres where customers can go for preventive maintenance servicing," says Mahindra’s Dubey.

Second, verify the details mentioned in the papers. If the car is over 15 years old, check the fitness certificate.

“The log of service history is another document that will help you judge the car," says Kunal Khattar, vice-president, carnation.in. One should look at when was the last time the vehicle was serviced and how many kilometres it has clocked, he adds.

Third, take a mechanic along to check for items such as flood damage, accident damage, current refurbishment required, scratches and dents, windshield damage, engine noise and so on.

As for insurance, it is essential to have the policy in your name, else you will not be eligible for the benefits in the event of accidental (own damage) claim.

There are cases of people going in only for third-party insurance for older cars, as it is mandatory in nature. However, Amitabh Jain, head customer service (motor), ICICI Lombard General Insurance says buyers should go for comprehensive motor insurance, which would include cover for vehicle damage as well.

Getting finances for buying a used car is not simple. Every lender will conduct its own valuation of the vehicle before sanctioning the loan. “The loan for a used car will depend on the financial status of the borrower, quality and title of the car. The loan rates for used cars are 3-3.75 per cent higher than new cars," says Sumit Bali, executive vice-president, Kotak Mahindra Bank.

The duration of the loan will depend on the age of the vehicle. For instance, some banks insist that the age of the vehicle should not cross 10 years at the end of the loan, says Ashok Khanna, Business Head, Vehicle Loans, HDFC Bank. However, the outer limit may vary on certain select models.

Luxury cars too are available
Most people associate pre-owned cars with smaller and affordable cars. However, car dealers such as Auto Hanger and Shreyans Group and portals such as carwale.com and carnation.in have put up luxury cars, too, for grabs. The price of these would include the import duty paid earlier. Cars that need to be imported are also up for sale, such as Hummers and Corvettes.

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