Organised used-car market to grow 7-9% this fiscal as demand stays strong: Crisil

India's organised used-car market is expected to maintain strong momentum this fiscal, with sales volumes projected to grow 7-9% and cross the 7 million-unit mark, driven by first-time buyers, improving affordability and rising digital adoption, according to a Crisil Ratings report released on Tuesday.

The used-to-new car sales ratio is also expected to remain above 1x, underscoring the segment's growing importance in the domestic passenger vehicle market.

The ratings agency said organised players are also making steady progress towards profitability as higher volumes, economies of scale and tighter cost controls improve operating performance. Asset-light marketplace platforms, which account for around 85% of organised used-car transactions, have already turned profitable, while inventory-led companies are reducing losses through greater cost discipline.

According to Crisil, first-time buyers now account for nearly two-thirds of used-car purchases. Rising prices of new vehicles and affordability concerns are encouraging consumers to opt for pre-owned vehicles, while also allowing them to buy better-equipped models at a lower cost.

"Used-car volumes are expected to grow 7-9% this fiscal, led by first-time buyers who account for nearly two-thirds of transactions," said Anuj Sethi, Senior Director, Crisil Ratings. He added that greater digital adoption has improved transparency, inspection standards and financing access, helping formalise a market that was traditionally constrained by trust issues.

The report noted that demand has remained resilient despite the GST rationalisation last fiscal, 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 vehicles, while utility vehicles offer savings of around 20%, preserving their affordability advantage.

Supply conditions have also improved, with the average age of used cars falling to around four years from more than eight years a decade ago. Faster model refresh cycles, shorter ownership periods and healthy new-car sales are increasing the availability of younger vehicles in the resale market.

Even so, India continues to lag mature markets, where used-to-new car sales ratios range between 2.5 and 3.5 times. Organised players currently account for about 26% of used-car sales, up from 20-21% in fiscal 2022, indicating gradual formalisation but also significant room for expansion.

Crisil also said inventory-led platforms raised around Rs 3,000 crore over the past two years to support growth, while marketplace players required no external funding after turning profitable. Going ahead, the agency expects capital raising to be driven more by expansion than by funding operating losses. It added that the availability of quality inventory, residual-value volatility during the GST transition, financing penetration and the pace of profitability will remain key factors to watch.